With the 2012 US presidential election just months away, you’d think that the state of the nation’s housing market would be a hot topic. Unfortunately, neither President Obama, nor the likely Republican candidate, Mr. Romney seems to have given the situation much thought.
Since the US housing market can represent, as much as one fifth of the country’s gross domestic product, it should hardly be ignored. The positive effects that a housing market that’s on the upswing could have on an economy that is increasing at a snail’s pace of 1.5 percent should definitely be examined.
A recent post on the site Bloomberg.com, reported on how both presidential prospects are leaning:
“President Obama has made little more than a passing reference to housing in his campaign, calling it a drag on the economy and recommending an expanded mortgage-refinancing program. Presumptive Republican nominee Mitt Romney said the government should avoid intervening and allow the housing market to “run its course,” wherever that may lead.”
Although changes have been made to loan and refinancing programs such as HARP and FHA, homeowners are still struggling. However, tighter credit restrictions have made it impossible for many to refinance, so they are unable to take advantage of low interest rates. According to the Bloomberg.com article, one in five mortgage borrowers owe more than their homes are worth, and this is the same rate as when Obama came into office. Another phenomenon is that the taxpayer-subsidized agencies, Freddie Mac, Fannie Mae, and the FHA, account for 90 percent of the current financing. This is preventing other lenders from doing business.
As for Romney, he tends to shy away from providing underwater homeowners with federal assistance. He appears to think that one hand will wash the other, and that the solution for the housing crisis is to improve the economy. From the Bloomberg.com article, Romney’s quote in February to a NV TV station was, “”if people are looking for someone to promise that they’ll write them a check, that the government will give them money, they should vote for President Obama.” It is unclear if elected, whether Romney would allow the current government programs to be upheld.
The Bloomberg article goes on to point out that although economic growth would help heal the housing situation, the current state of affairs with troubled homeowners, is making an economic rebound very difficult. As anxious Americans wait to hear solutions from the two candidates, the global financial mass media corporation, Bloomberg.com has offered a few suggestions of its own:
- Forgive 50 percent off the mortgage principal for those borrowers who owe more than their homes are worth.
- This would provide an incentive for homeowners to restore the equity and avoid foreclosure.
- To prevent that this act of forgiveness would not encourage irresponsible behavior such as defaulting anyway, borrowers would agree to give up 25 percent of any future appreciation. This would allow participating lenders some degree of compensation.
Finally, it stated that both candidates need to “spell out their visions for how the housing market should operate.” As for President Obama, the Bloomberg editors urged him to take a hardstand and demand that the director of the Federal Housing Finance Agency, Edward DeMarco, forgive mortgage debt.
Real Estate Agents Make Some Predictions on the Housing Market
The National Association of Realtors surveyed over 50,000 real estate professionals for its June Question of the Month, which asked, “What are your expectations for home sales?” The data was collected from June 25th through July 5th, 2012. Bear in mind that responses are gathered from markets across the country. Here are a few highlights from that survey, aka, the RCI or Realtors Confidence Index.
- Homes are still considered affordable due to continuing low interest rates and the slow rate of inflation.
- Compared to the y-o-y comparisons, 64 percent reported that homes were recently sold at either constant or slightly higher prices. Of those, 5 percent said that prices have gone up by 10 percent or more.
- 86 percent felt that prices would remain the same or increase through 2013.
- Although the number of new listings and inventory are both down, the number of potential buyers is increasing. The inventory at the time of the survey revealed a 6.6 month supply, compared to the 10 month supply available during the same time frame in 2010. This should cause prices to rise.
- The average time properties are spending on the market is going down, which also helps to keep prices from dipping. Around one third of properties were sold in one month or less. 58 percent were purchased within 3 months of being listed.