No one denies
that the economy will go the way
of the real estate market. To
date, nothing has been done to
stop falling real estate prices.
The United States
has the most valuable real
estate in the world.
So why isn’t our
Government standing behind it.
No bail out, but
rather a restoration of
confidence. The real estate
markets have turned downward
mainly due to lack of
confidence. Lack of confidence
in the future value of real
estate, the quality of the
mortgage portfolios that finance
it, and in the future of the
U.S. economy.
The fact is, that
much of the misinformation, and
exaggeration’s about this market
early on in 2007 created fear
and uncertainty.
There is nothing
wrong with our real estate
market. There is something wrong
however, with the public’s
certainty and confidence about
this market. This is not
to belittle the problems with
foreclosures or that there was
no bubble created due to
excessive leverage. These
problems are concerns that need
to be addressed as well.
Reversing the
downward trend in the real
estate market requires
eliminating the uncertainty and
re-newing confidence. Buyers will
only come back if they believe
that real estate is finished
with its downward trend. In
general, people and economists
think linearly, while the
psychological impact to the
markets are more exponential.
You cannot change
this market without changing how
people think and feel about this
market.
Without achieving
this, there can be no recovery.
This can be
accomplished by our government
backstopping the value of real
estate. Give home buyers an
incentive to buy a home. Right
now, homebuyers are waiting for
home prices to continue to drop.
Allow home buyers to write off
up to a 15% loss of future value
on their purchase of a primary
residence, on their income tax
for a period of the next five
years.
Home buyers would
return to the markets and the
tide of real estate would
reverse almost instantly. In
fact, there may actually be no
cost to the government, because
there would be no further losses
to the real estate market.
Similarly, the
government is backstopping
Fannie Mae and Freddie Mac by
promising to buy $500B in
mortgage backed securities with
the hopes of driving down
interest rates.
