Stop crying already!
Yes (for the umpteenth time), the $8,000 tax credit is ending this week and it’s a blessing sent from above. Why do I say this? Not just because the country has been hanging from the teet of the federal government since the great crash, but because it has allowed the lending world to become dependent and outside of the game of risk for far too long.
Without the federal goverment’s aid, it’s true that most financial institutions would have fallen in the midst of crisis. The $8k tax credit (and TARP) gave institutions a chance to catch their breath, and a much needed steady flow of loans, but it’s time for these little birdies to fly once again, and put the old saying of “lenders lend” back into practice.
As evidenced by these reports here and here, consumers are telling the entire real estate industry loudly and clearly that it ain’t about the damn tax credit, it’s about actually qualifying for an affordable loan.
Fly, baby bird…
As I said, the teet of the U.S. government is dried up and Mama Washington is putting her old bra back on, and it’s cause to celebrate! Although there may be a short lull as lenders react and learn to find food on their own, the great news is that they will, and what you’ll get once that baby bird flies is (hopefully) smarter lending, smarter incentives, a more practical housing market, and solvency in values.
I suppose now the question is, which bird leaves the nest first in search for food? Who’s going to lead in this new real estate market and who will simply die?
April 30th should be a new national holiday, an Independence Day if you will, and it will be, so long as the White House keeps their hands off of the free market…
CC Licensed image courtesy of ttstam via Flickr.com.
Jim Duncan
April 29, 2010 at 2:53 pm
Exceptionally well said, Benn. Thanks for saying what I’ve been thinking. The tax credit should have never been put in place. It’s free money, borrowed from potential enemies that ultimately has artificially propped up the market and has delayed the inevitable.
Good riddance.
Justin Boland
April 29, 2010 at 4:41 pm
“borrowed from potential enemies”
Actually, the Fed just prints money. I believe in politics that’s called “acting unilaterally” — where China gets involved is the buying of US treasury bonds. Those bonds all get auctioned after the fact, though, and the fact is: the Fed just prints the money.
Benn Rosales
April 29, 2010 at 5:15 pm
Actually, Jim, it occurs to me that what is fueling the economy right now are the roughly 48% of the country NOT making mortgage payments. Many of which are employed, but feel the cribs underwater in value and waiting for the auction. There are many things that are propping up the markets and fueling some growth, hell, look at Ford, GM, the tech sector, android phones, iphones, ipads, where’s that cash and confidence coming from? heh probably the increase in income they’re capping on that should be paying the mortgage – oh yeah… there’s pandemonium happening, you just don’t see it through the good news around wallstreet right now. That’s not welfare buying those new toys… that’s the anticipation of welfare that buys consumers out of costly bad loans, and foreclosure forgiveness- talk about money being printed… we ain’t seen nothing yet, unless lenders see and understand that what we used to see as gold credit is the new subprime and fire up the lending machines…
BawldGuy
April 29, 2010 at 3:56 pm
Lenders lend.
Good stuff, Benn.
Bruce Lemieux
April 29, 2010 at 7:22 pm
Glad the credit is coming to an end. It will be interesting to see if we see a cash-for-clunkers effect for entry level homes over the next couple of months.
Erica Ramus
April 29, 2010 at 8:36 pm
Amen. I am hosting a Broker Open tomorrow, to FEED the agents, at one of my listings. My invitation said COME CELEBRATE with us! We’re going to enjoy a nice lunch and toast to “back to normal”. Whatever that means.
Bryan Faircloth
April 30, 2010 at 8:31 am
I wish the tax credit had ended March 30 instead of April 30. As an agent, I would have received my hard-earned and well-deserved money sooner. 🙂
Joe Loomer
April 30, 2010 at 9:08 am
Irreverent and awesome – great post Benn. My wife has four buyers she’s working in the next week – none of whom give a toss about the tax credit – one quote? “Would have been nice to get it, but we really are more focused on the right house in the right location and school districts”
Keep carrying the torch!
Navy Chief, Navy Pride
Benn Rosales
April 30, 2010 at 9:54 am
I’m still curious though, who will step into CountryWide’ss shoes and lead in the new real estate market of lending? Who will define the new subprime, acceptable and unacceptable, and create loan packages that fulfill demand – by all accounts and every survey and focus I’m reading, consumer demand and sentiment is behind investing in real estate…
Are we to just leave investors in the cold now? no second home? no loans that make sense in the jumbo markets?
Justin Boland
April 30, 2010 at 9:59 am
Re-read this today and the ending confused me:
“April 30th should be a new national holiday, an Independence Day if you will, and it will be, so long as the White House keeps their hands off of the free market…”
I don’t anything to debate, I just wonder where you’d draw that line. Considering that recent AP piece about how 96.5% of all the home loans in 2010 were backed by the Other Big 4 — FHA, VA, Fannie and Freddie — and considering that since the Federal Reserve stopped their MBS buying program, Fannie and Freddie are picking it up to the tune of $200 billion…are these facts that worry you in terms of the housing market? Or do you think of that as “downstream” effects that will improve once Realtors have a clear playing field again? I can see how more organic home sales would create more appetite for new MBS/ABX buying, but I’m just wondering what your stance is.
How “free” does the market need to be?
Jonathan Benya
April 30, 2010 at 10:41 am
May she rest in peace. As much as the bump in business is appreciated, free markets need to reign supreme in order for this economy to recover.
BawldGuy
April 30, 2010 at 11:53 am
Hey Benn — I’ve been closing investor loans consistently, albeit sometimes with much thrashing about. My guess is that direct lenders, big ones, will lead the way with investors. That’s what I’ve been experiencing the last couple quarters.