The good news about the “Housing and Economic Recovery Act of 2008″
Posted in Market Trends and Projections, perspective | By Blair Newman and Dave Emerson | Tags: housing market, housing relief bill, Los Angeles County Housing Trends, Orange County Housing Trends, Southern California Housing Trends
(7/30/08) Back on April first of this year, while debate was raging on the bill, we wrote a post titled “Major housing breakthrough near?“ It included the following:
It looks like our leaders may finally be setting aside their egos and personal agendas to work together for the common good.
Behind-the-scenes discussions between Congressional leaders and the Bush administration may be about to bear fruit. And that fruit would be a pragmatic Housing Relief Act of 2008 which combines the best ideas from partisans of all stripes to provide both immediate relief and long term reform.
The comments off the record are almost unbelievable: “The collapse of the American housing and lending markets is an impending crisis that compels us to lay aside partisan differences and work together,” one Senate leader has discovered. “Ultimately, we’re all in the same boat, and if it sinks, we all drown!” she continued.
“We need to recognize that we are all on the same team,” according to a key administration figure. “We need to stop acting like the Shaq and Kobe Lakers and start acting like this year’s UCLA Bruins. You don’t see Collison and Love fighting for the ball!”
The details are still being finalized, but they involve major concessions and some unique innovations from both sides of the aisle.
We meant it as an April Fool’s post!
Turned out, the joke was on us, & we’re glad!
While the bill’s far from perfect, it includes a lot of positives, from increased oversight of the mortgage giants Fannie, Freddie, to tax credits for first time buyers for a limited time.
What’s especially significant is the numerous compromises it took to get the bill through Congress. For example, that first time buyer tax credit ended up being an interest free loan that has to be paid back over fifteen years. Stimulus for housing now, partial payback for the taxpayers later.
Many housing bears are eager for values to fall more, even if it does ruin the nation’s economy and banking system. Their hatred for this bill might be evidence they fear it just might work.
We think it’s a step in the right direction. Maybe several steps. The bottom of this crash is at least a little closer today than it was yesterday. On our latest projections post, we increased the probability of a bottom within the next seven months by 5% directly as a result of this bill. Hopefully, we’re being conservative. (That post also lists some of the additional beneficial features of the bill.)
Thanks to those leaders in D.C. that finally realized that ultimately, as Americans, we’re all on the same team!
Tags: housing market, housing relief bill, Los Angeles County Housing Trends, Orange County Housing Trends, Southern California Housing Trends
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August 14th, 2008 at 7:30 pm
What is the team? - those that lend money & make money by doing so - that’s team one - team two are those that have loans they can’t afford - unfortuantley team one has team twos money, team two is still losing their homes.
August 14th, 2008 at 7:42 pm
Phyllis,
Thanks for your comment.
Actually, in the original April Fools’ post the “team” my mythical “key administration figure” was referring to was intended to be our elected leaders in D.C. The concept I was hoping for was a bipartisan effort in both the Congress and the Administration to work together to come up with positive steps to lessen the impact of the mortgage failure.
You do make an interesting point about the teams being the lenders and the borrowers, but I would have to disagree with you as to which team has the money. Right now, both lenders and borrowers are “upside down” in an awful lot of cases, for a variety of reasons (see “How we got into this mess” for the sad details).
Hopefully the housing bill will contribute to both teams eventually getting back to a sound financial position.
August 15th, 2008 at 7:34 am
You are correct, the lenders don’t have money (after several years of record profits) But our budget talks are at a stall because of them and a tax write off.
Be interesting to see what kind of salary the big guys get this year….. Versus how many employees get laid off.
August 15th, 2008 at 2:52 pm
Phyllis,
I don’t even want to think about it. Countrywide CEO Angelo Mozillo got a $110 million severance package after running them into the ground. . . in addition to $140 million he got from cashing in stock options late in 2006 and in 2007.
Hopefully by now the insanity’s over as everybody tries to dig out. There certainly seem to be some exceptional bargains out there in REOs and short sales. We’ve gotten every short sale we’ve put together approved so far.