T-7 days until the Election
This is the conclusion of the Wall Street Journal after analyzing the Case-Shiller Index. From a political point of view you could say that stopping the plunge and bringing the average real estate values back up to nearly what they were when the Obama Administration took over in Washington was a victory of sorts. The opposing point of view is generally that the cycles of the market were set to recover naturally if we could restore confidence in the job market. Over a 20 year period, real estate has generally appreciated about 4% per year. So being down 3.7% rather than being up by 16% gives some credibility to the arguments that we needed to do more to help the job market to allow more potential buyers to qualify for mortgages.
A 2nd opinion from Bloomberg: “65 percent of those (U.S) communities were worse off (in 2012) than they were in 2008.” The impact of our recovery is not uniform across the country. For instance, if you happen to be in Washington DC, you will have seen significantly more appreciation in the last four years than those an hour south down Interstate 95 in Virginia!
Another factor to consider in evaluating whether to continue with the existing administration is the question of just how bad was the economy when Bush handed off the baton to Obama. Some of the effect of foreclosure is to erode home values months or even years after the foreclosure when the banks place homes back on the market. The pace of foreclosures began to skyrocket in 2007, well before President Obama took office. On the other hand, the current administration has been the beneficiary of the enlightenment of lenders by the painful lessons from the early years of aggressive foreclosure practices. While finding ways to mostly disregard HAMP, HARP, HAFA and other edicts from Washington DC, the lenders have, as a matter of self-interest, worked harder over the past two years at alternative resolutions to the mortgage default crisis. “In a report titled “Collateral Damage: The Spillover Costs of Foreclosures,” researchers Debbie Bocian, Wei Li, and Peter Smith conclude that, based on the 10.9 million loans that entered foreclosure between 2007 and 2011, approximately $1.95 trillion in property value has been lost or will be lost by residents who live close to foreclosed properties.” So while homeowners have lost real wealth by the lost value in their homes, or worse yet, they have actually lost their homes completely, their lot in life has not significantly improved over the past 4 years. Unemployment and underemployment continue to fuel the home loan default rates. But at least Lenders have begun to come to grips with the fact that in most cases there are better ways than foreclosure stop value drain. It is hard to measure, but the “work-out factor” has begun to have a positive impact on home values in the past two years.
For real estate industry professionals, many are willing to forsake other affinities and causes to vote for the candidate who seems most able, focused, and pragmatic to accomplish greater recovery in the home values and sales in America. More than the population in general, the real estate industry seems to lean toward a change in the administration in DC to accomplish the bipartisan cooperation needed to heal the real estate economy. For homeowners and especially for FORMER homeowners who would like to be homeowners once again, it is important to consider the likely impact of our future leaders on their ability to retain and prosper from real estate ownership.
Since there has been too little said by either campaign on what they will do to fix the real estate economy, many voters just resort to wishful thinking: “Right now I think there [are] a lot of people who are sort of waiting and hoping that if Romney is elected, if Obama is elected, that they’ll have a kind of secret plan to replace the current strategy with proactive policies that say … ‘We understand how important housing is to a recovering economy, and we’re going to make sure that 2013 doesn’t look like 2009 through 2012. . .'”. This was the conclusion of Derek Thompson, senior editor at The Atlantic, following the housing market for NPR. He says “housing is a major driver of the overall economy because it impacts multiple sectors. When you buy a home, for example, you also buy things to put in it. When companies notice that kind of activity, they respond, . . . “. So it is important, for every aspiring homeowner to research, analyze and carefully consider the vote they will cast a week from today! It will make a difference!
Four points ideas that might help the homeowner/voter looking for which candidate to support : (1) Which candidate impresses you with a plan and commitment to stimulate job growth?; (2) Which candidate advocates limiting over-regulation of the lending industry? New regulations in the last 4 years are reducing lending competition, making loans harder to get, and generally not doing anything to protect the consumer that ENFORCING the old regulations would not have done! “U.S. regulators including Federal Reserve Chairman Ben S. Bernanke and Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, have expressed concern that banks are preventing qualified borrowers from taking advantage of interest rates driven to record lows by the Fed’s quantitative easing strategy.” Other important issues include : (3) Which candidate supports re-enacting the Bush era tax laws, including the continuation of the exemption from taxation as “phantom income” some debt forgiven by lenders in short sales; and (4) Which candidate has the leadership and ability to help America avoid the “Fiscal Cliff” that we are approaching. The latter issue addresses the buyer confidence factor . . . . why buy a house if the economy is only guaranteed to crash further because we continue to grow the deficit?