NAHB| Fix Housing First, A Lobbying Effort That Thinks BIG!
December 9th, 2008 Categories: Housing Stimulus, Real Estate News
NAHB Message to Congress and President-Elect Obama:
Fix Housing First
Charlotte NC The National Association of Home Builders, NAHB, has yet to announce a formal proposal, but it is assembling a major lobbying coalition and effort around the slogan, Fix Housing First. As the new Congress and new administration plan a major economic stimulus plan anticipating a January passage, the NAHB wants to see Housing Stimulus in this first bill, a bill Congress is likely to pass.
NAHB Housing Stimulus Plan
The formal plan has yet to be released, but the NAHB has let it be known there will be at least 2 key elements…as so far outlined, they are:
A) “A 10 percent home buyer tax credit up to a maximum of $22,000, depending on the FHA loan limit in a given market. Available to all buyers who purchase a home over the next year, the tax credit would not have to be repaid by the buyer and would replace the temporary $7,500 first-time home buyer tax credit due to expire on July 1, 2009.”
I’ve stated before that I believe in tax credits as a tax policy tool to spur investment- but this (IMHO) appears to be a bit much. In the 1970′s, a $2000 credit and lower interest rates worked to stimulate housing. I think $7500 to, $10,000 tax credits will in all likelihood be enough in conjunction with lower interest rates, enough to stimulate the housing market in a big way. I do not want to “over-stimulate” the housing market. We’ve done that already with junk loans. We just need enough demand to stop the downward spiral of home values, not artificially raise it. But the downward price spiral and crushing collateral community damage must be stopped.
B)”An interest-rate buy down on conforming loans for all families purchasing a home through the end of 2009. The plan would reduce the interest rate to 2.99 percent on 30-year mortgages for homes purchased through June 30, 2009; the interest rate would increase to 3.99 percent on contracts closed between July 1, 2009 and Dec. 31, 2009.”
These loan buy down rates are huge, I like this with some conditions. It should apply NOT ONLY to all new mortgages, but have a refi component as well, to help those with ugly mortages pending foreclosure. I think the higher conforming standards should be made effective across the board, with no expiration before 2011. Consideration needs to be made for Jumbo loans, atleast up to $1M, for home values to $1.2M. First and 2nd homes should qualify, investors, probably not.
So a $300,000 loan at 5% fixed for 30 years, your PI-Principal + Interest = $1610 Add 600 monthly debt, total PI + Debt , not to exceed 40% of gross income, requires monthly income $5,525.00, $66,300 per year gross.
And the same loan, 300,000 at 2.99%, fixed 30 year, your PI is $1,263.00, add the 600 debt, minimum income at 40%, is $4157/mo, or $49,890 per year.
That’s a big difference in the number of people who can afford the $300,000 home in Charlotte.
Then there is the issue, Put Housing First… should it be first?
The right plan for Housing should be first. A plan that brings buyers back into the market
The national residential building industry is on its back, and is looking for Congress to help. It serves some help- enough to create some demand, but in no way take it back to the god old “glory” years like 2005. There is over capacity in the new home industry, some of it must be eliminated.
What do you think? Do We need it? and Should the priority be at the same level as the mortgage bailouts?
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Hi, I plan on being a first time home buyer this upcoming year, hoping this stimulus will come into effect so I can take advantage of it. Although I don’t already have a mortgage, I agree with you for the refinancing. People stuck with ugly loans need help too, and it will help to fix the foreclosing problem.
Half the problem in the housing market is people aren’t buying, while the other half of the problem is too many people trying to sell. This is obviously a direct result of the junk loans.
I also have a question. How exactly does the tax credit work? From what it sounds like to me, you get 10% (up to 22k) of your loan amount back on your next tax return. Am I right? If you could please email the answer, thank!
Well the tax credit is the same as a rebate– but remember the NAHB ideas above are only proposed, not adopted and signed into law. Still, it’s going in the right direction for first time buyers, and home buyers really. That’s why I’m all for bringing on that housing stimulus!!