By Robert Freedman, Senior Editor, REALTOR® Magazine
Almost 85,000 of you sent letters to your members of Congress over the last month or so to get them to do what by any measure is the right thing to do: give your clients more time to close on their deals so they can get the home buyer tax credit. President Obama signed the legislation into law a day later. Your calls also helped spur Congress to renew the National Flood Insurance Program.
The tax credit deadline extension was needed because of the high percentage of transactions today that are short sales. You know better than anyone how long these transactions can take, so clearly anyone who had a ratified contract submitted by April 30 would be challenged to get that purchase closed by June 30, the original deadline date. That two-month time frame only makes sense for buyers who are buying under normal conditions. And short sales haven’t been the only problem. Many lenders have simply been handling more applications than they could handle in a timely fashion.
The tax credit was a short-term program so you would expect hiccups like what we saw with the mismatch between the contract submission deadline and the closing deadline. But flood insurance renewal is a different matter. Few people would disagree that Congress needs to give the program a thorough look, and indeed NAR has been out front in calling for commonsense reforms that improve the program’s efficiency and its fairness. But there doesn’t need to be a disconnect between reviewing the program with an eye toward improvement and keeping the program going so routine transactions can get completed. Both can and should be done at the same time, especially today, when improvements to real estate markets remain fragile. (See the 3-minute video interview above with NAR Chief Economist Lawrence Yun on today’s release of pending home sales figures.) Continue reading »
By Robert Freedman, senior editor, REALTOR® Magazine
Sen. Harry Reid (D-Nev.)
One of the frustrations we’ve been hearing from agents is that their clients want to take advantage of the home buyer tax credit but because deals are taking so long to close, mainly because of short sales, there’s a good chance they’ll miss the deadline.
That’s a concern that NAR has been sharing with members of Congress, and now we have evidence that lawmakers are taking the concern seriously.
Yesterday, Senate Majority Leader Harry Reid (D-Nev.) along with Sens. Johnny Isakson (R-Ga.) and Chistopher Dodd (D-Conn.), the Senate Banking Committee chairman, introduced legisation to extend until September 30 the closing deadline for households who have had a contract pending since April 30. Under the program as it stands today, these households have to close on their purchase by the end of this month or else lose their eligibility for the tax credits.
Two weeks ago I spoke with NAR Chief Economist Lawrence Yun and at that time he said REALTORS® were making a strong case to lawmakers that this extension is vital given how long it’s taking households to get to closing right now. He said it would be a shame if these households, through no fault of their own, missed their chance to get the credits simply because they were trying to buy a home that was on the market as a short sale.
Apparently, lawmakers are thinking along the same lines. When he introduced the proposal yesterday, Sen. Reid’s office said in a written statement something very close to that:
“There is growing concern that because of the time it takes for banks to complete transactions such as short sales, many of these home purchases would not be complete before the deadline through no fault of the homebuyer.”
NAR estimates about 180,000 households could see their chance at getting the tax credits disappear if the deadline for closing isn’t extended. What the Reid bill suggests, given its bi-partisan co-sponsorship, is that lawmakers across the board are aware of the delays caused by the large number of distressed sales in the market today and they don’t want to see home buyers penalized.
Considering the still-fragile state of the economy, taking steps to help those 180,000 households that made a good-faith effort to meet the deadline is something lawmakers clearly see as a reasonable and bipartisan accomodation to today’s short-sales climate.
By Robert Freedman, senior editor, REALTOR® Magazine
The two top economists we heard from yesterday on the state of residental markets were genuinely optimistic but just as genuinely concerned. The optimism stemmed from the clear improvement in the economy we’ve seen in the past several months, particularly in the jobs picture. We’re now creating about 125,000 jobs a month after losing almost 9 milion jobs during the meltdown. As you’ll see in the first video clip of Mark Zandi, chief economist of Moody’s Economy.com, we’re creating jobs at the rate we need to to get back to full employment (defined as an unemployment rate of 5.5 million), but it will take years to get there. Watch the 40-second clip to hear his take on where jobs are going.
What brought us to this point of stability? NAR Chief Economist Lawrence Yun made it clear it was the home buyer tax credit and continuing low interest rates (thanks to Federal Reserve’s intervention in the mortgage-backed securities (MBS) market). Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
It’ll be interesting to see what happens on Monday. That’s the day lenders who participate in the federal government’s mortgage modification program are required to participate in its standardized short-sale procedures. All of the big lenders participate in the modification program, so all of them are committed to participating in the short-sale program, too. So, the main universe of lenders will be following the new procedures.
Of course, Fannie Mae and Freddie Mac haven’t come out with their own guidelines yet, although they’ve said they will be doing so soon and that their guidelines will be based on the government’s program (hard for them not to be, since the companies are under government conservatorship now). So, once those guidelines are out, most mortgages will be eligible for processing under the federal short-sale procedures.
In reality, little will change right away. The short-sale guidelines put timelines in place (when to respond to a short-sale application, for instance), but lenders are unlikely to meet them because the deadlines aren’t realistic now. It’s more appropriate to look at the timelines as aspirational goals. So, it’s probably safe to say that although the days of six-month waits to hear back from lenders on short-sale applications are over, neither will those applications get processed in 10 days.
Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
There are many reasons for the success of NAR’s most recent Call for Action, to which more than 18 percent of NAR members—a record— responded.
First and foremost is the compelling subject of the CFA: getting the home buyer tax credit extended and expanded. As NAR Chief Ecionomist Lawrence Yun has been saying for weeks, residential home prices are stabilizing and are on the cusp of heading up—the all-important precursor to restored confidence in homeownership. We’re relying on that improved confidence to boost sales, tighten inventories, and restore healthy credit markets.
Given that, letting the credit expire on Nov. 30 could have stopped sales momentum dead in its tracks.
It was also huge that Congress added the $6,500 credit for repeat buyers, because throughout 2009 much of the sales weight has been carried by first-time buyers. For market stability, repeat buyers needed to get off the fence and Congress saw that. Continue reading »
By Brian Summerfield, Online Editor, REALTOR® Magazine
Amid several news reports that the first-time home buyer tax credit will almost certainly be extended, I’ve seen more than a few blogs and online comments arguing against it. Some of them say the government can’t afford it, and lament the fact that we’re borrowing from our children and grandchildren to pay for this. Others maintain that the tax credit artificially stimulates demand, and the market will resume its slump whenever it does expire. Still others claim that it hasn’t really motivated enough buyers who would not have otherwise purchased a home to justify the program.
I may disagree with some of these arguments, but I’m glad people are making them. It’s essential that we have a healthy debate on this important subject rather than move forward with our eyes closed and our mouths shut.
However, there is one argument that I take issue with: The tax credit and the “Cash for Clunkers” program are essentially the same thing. I’ve read this line of reasoning in a few places, and in each instance, it seems to confuse rather than clarify. It seems to me that the two initiatives are very different in a few significant ways: Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
A handful of bills to extend and increase the First-Time Home Buyer Tax Credit are under consideration in Congress, but if you have clients who are holding out in anticipation of one of these bills passing, you might want to encourage them not to wait. The likelihood of any of these bills getting enacted this year is highly uncertain.
That’s the message I’m getting from NAR analysts. The issue isn’t the tax credit itself. From everything we’re seeing, the credit enjoys broad bipartisan support and, as our chief economist Lawrence Yun has said, the credit is a bargain when it comes to economic stimulus. You get a lot of bang for the buck, and I think it’s safe to say that a lot of lawmakers realize that. Certainly Sen. Johnny Isakson (R-Ga.) does. He’s the lead sponsor of a bill to extend and increase the credit, and he’s been a champion on what the credit can do for the economy.
The problem, rather, is far more prosaic. Continue reading »
Recent Comments