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Why NAR and the government should stop trying to fix housing

Newest attempt to “fix” housing- a Summit

Oh, boy.  We know there’s trouble when NAR not only requested, but is now planning to host a Housing Summit in DC, scheduled for October. Business, economist, and policy making type people should be in attendance. The point? To find a solution to the housing industry disaster.

Attempt one: tax credits

The things that have been tried (some with a modicum of success, others, not so much), haven’t exactly done a whole lot to fix the housing mess. We had the First Time Buyer Credit, which also could apply to move-up buyers. While it increased the amount of sales for a time, it didn’t exactly affect values. Most people just bought sooner than they would have, and there was a slight increase in sales prices, due to well, eight grand being tagged onto asking prices. 

Attempt two: loan mods

There have been both Government and individual bank programs for loan mods, in which interest rates, principle, and missed payments could all be reduced. Also included with the loan mods are programs for the unemployed and underemployed, initiatives to streamline short sales, and billions of dollars for states that are “hardest hit.” 

While millions and millions of owners have not been helped as promised when bank and government sponsored programs rolled out, a fair amount of people are at least getting modifications. However, they are also redefaulting at an alarming rate. Interest rates themselves are, wait for it… at historic lows (I hate this term more than lima beans, and I really hate lima beans). Even if they weren’t super low, this isn’t the early ‘80’s after all. Anything under ten percent is awesome. 

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Attempt three: government programs

Fannie, Freddie, and other banks even had foreclosure moratoriums. True, some were due to the robo-signing fiasco, but there was a good period a couple of years ago where many were self-imposed. Of course there was TARP, which, well, what was the point of that? So that banks wouldn’t fold, and they’d have capital to lend? How’d that work out again? 

We also have new departments in the government like the Consumer Financial Protection Bureau and a boatload of new rules thanks to the Dodd-Frank Bill. Since most of these have either just gone into effect or have yet to begin, it’s too soon to say what will come of them. A lot of different policies and programs have been attempted.  Overall, the success rate has been dismal. 

Fresh, new ideas

Some of the new, and fresh ideas (sarcasm much?) bouncing around, are Fannie/Freddie REOs being turned into rentals, mass refinancing for loans backed by Fannie/Freddie, extending jumbo loan-limits, flood insurance, and let’s not forget the ever popular, but rarely done, principle write-downs for those filing bankruptcy, or for those who are underwater. 

Are there any other innovative ideas that (1) will come out of a NAR Housing Summit, and (2) not suck? My vote is no. As many of us at AGBeat has long noted, this isn’t a housing problem, it’s a jobs problem. If a borrower or homeowner has little income or is on unemployment, if their credit scores are in the tank, they have zero dollars for a down payment, and their prospects for the future are bleak, who in their right mind would lend them money to buy or re-fi a house?

The real answer:

Listen, I’m no economist, hell, I almost failed the same math class with the same teacher- twice. Obviously, I’m not involved in huge, mega business decisions that affect thousands of people, or schmoozing with the Feds to implement or change policy, either, but I have spent my entire life around real estate. Developing some new, crazy, housing policies is not the way to go. Please, Powers That Be, let the freaking dust fall where it may, and stay out of it. Stop trying to fix housing with the theory that stabilizing it will result in a magic pill for the economy at large.   

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Please, PTB, instead of a Housing Summit, try a Job Summit. Actually, just call it a meeting, a gathering, a pow-wow- anything but a Summit. And try inviting real, everyday people, too, not just dudes in suits- who knows, ideas like this may come up? We could try throwing bucks at those who can, and want to go to school to improve their current credentials, or train for new careers. Instead of wasting cash on repaving roads that don’t need it (yeah this happened right down the street from us), money could be invested in the tech and medical fields to create and open up more opportunities. Grants could be given to cities that would allow them to re-hire teachers, safety forces, and admin people. And while I’m not huge on tax breaks for all, we need to make the working environment just a tad friendlier in states that have outrageous rates for both employees, and business owners.

A Housing Summit is so not needed. It’s a waste of time and resources. Fix the job problem, and the whole housing thing will fix itself.

Written By

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.

152 Comments

152 Comments

  1. Sheila Rasak

    September 5, 2011 at 12:38 pm

    Amen to the writers at AG. I too believe the housing market must correct itself and temporary fixes are just that. The banks are in somewhat of a lull in California and the promises of loan modifications are leaving a bad taste in the borrower mouth. Typically my clients get strung along for 18 months only to go into default resulting in a foreclosure after the denial because the client is too tired to start the short (long) sale process.

    • Kathleen Cosner

      September 5, 2011 at 12:59 pm

      There so many options available, other than throwing good money after bad. Remember the CARS program? How'd that turn out? And more importantly, how many have been repo'd?

  2. Dee Hunter

    September 5, 2011 at 12:39 pm

    The writer by her own admission admits she is not an economist. She is entitled to an opinion. However,frankly AG is arguably reckless to give such unsubstantiated opinions so much publicity. This could be the most substantive piece on housing half the Tea Party has read.

    • Lani Rosales

      September 5, 2011 at 1:03 pm

      Dee, thank you for visiting. Our columnists range in opinion from heavy handed governmental regulation to a more laissez faire approach and we have a diverse group of writers here (as well as readers).

      In our opinion, it would only be reckless if no other opinions were ever offered (which they are). No one here ever agrees on everything and our group is extremely diverse which is an advantage we have over right wing or liberal leaning publications.

      But since you're here, we ARE interested in hearing your thoughts on what the best way forward is for housing… we're all listening as we grapple through this mess together!

    • Kathleen Cosner

      September 5, 2011 at 1:10 pm

      Hi Dee-
      Thanks for reading! They say the definition of insanity is doing the same thing repeatedly, and expecting a different result. Things in place are not working. New things need to be attempted in order to get everyone back to a better place. We can't keep our traps shut and offer no new ideas if we want new results.

    • Justin Ochs

      September 6, 2011 at 2:44 pm

      Reckless? Hardly…

      Tea Party reference… Are you serious?

      The problem with both the NAR and the Government is that, as usual, they are only thinking of themselves.

      Although a Realtor myself, I have had serious issue with constant badgering of the NAR to keep the mortgage tax deduction.

      Yes, I'd like to keep it to, but not at the expense of all of America's debt crisis.

      We are all going to have to give up something to get out of this mess.

      The government has yet to successfully run a program more efficiently and profitable than the private sector.

      NAR – Quit thinking of #1 and think about the good of all America.

      Government – Quit doing what your doing… it's not working.

  3. Brian Jones

    September 5, 2011 at 12:48 pm

    What a refreshing post. This is one of the reasons I love you guys at AG – you get it.

    Whenever the government artificially manipulates a sector of the economy, it will require intervention in perpetuity. It will not fix it long term without further/future manipulation or stimulus.

    Many of the points in this article also apply to the MID. Why the NAR has put so much focus and money into fighting for it is beyond me.

    Keep up the good work AG.

    • Kathleen Cosner

      September 5, 2011 at 1:03 pm

      Thanks! When I saw the intent to have the summit on NAR's site, all I could think of was, not again. I know housing is a huge part of the economy, but like anything else, it will have ups and downs, and just needs to work itself out.

  4. Mark Brian

    September 5, 2011 at 3:03 pm

    Ding ding ding we have a winner! Jobs is the answer for the mess in housing and the economy!

    • Kathleen Cosner

      September 6, 2011 at 3:04 am

      If more people could grasp this, it'd be awesome.

  5. Matthew Ferrara

    September 5, 2011 at 3:14 pm

    Nice post, but you're shouting into outer space. There's no way either the government or NAR will let a "good crisis go to waste." They've been "talking" for nearly five years – and tried every twist and turn and scheme. A summit is silly; it's feel-good instead of ACTION. If there are good ideas to be taken, then the private sector should DO them. If the government is in the way, brokers should EXPOSE it. Going to a meeting to try to "work together" is ridiculous when one (or possibly more) of the parties in the room IS the problem. I'll let you decide.

    I've been arguing on my blog that the government should just get out of the way since May 2008. NAR just keeps begging for one deal with the devil after the other.

    Funny: they've sold plenty of iPads in the meantime. And what subsidy program did they get to do that??? Hmmmmmm.

    Well, I enjoyed the post all the same.
    – MF

    • Kathleen Cosner

      September 6, 2011 at 3:08 am

      You may be correct, Matthew. Whatever the Gov has been trying to do to help, hasn't made a dent. It's time to try a different approach.

  6. Don Reedy

    September 5, 2011 at 6:06 pm

    <em>(I hate this term more than lima beans, and I really hate lima beans)</em>

    You and I must have the same genetic makeup. When I was in the Marines I used to joke that they could chop off my body parts one by one and I still wouldn't talk. BUT if they made me eat lima beans….adios national security.

    Really good post. Spot on. Nothing to be gained by the talking heads talking to each other. And a "summit" is a "zero sum gambit" at best.

    • Kathleen Cosner

      September 6, 2011 at 3:10 am

      Lol, Don!

      And I agree. Summit just makes me, rightly or wrongly think of that Beer Summit joke.

  7. Bernice

    September 6, 2011 at 3:55 am

    What we needed from the get go was, for the Administration to give the money to the people instead of the bank so they could pay off their debt's (mandatory). This way the banks would be happy and have their money and out of the foreclosure crisis, and the people would still be in their homes paying taxes. The economy would take an upturn when people are not disrupted and thrown in the street to live.
    How in the hell did everyone expect to see housing doing better when people watch the news everyday and read and see what is happening to people who purchased homes and the devaluation of the Real Estate market.
    A lot of these things could have been avoided.
    Also modification didn't work. Mainly because the banks don't know what they are doing or their dragging their feet and then rejections are purposeful. It seems that way. You wouldn't believe some of the stories about modifications I have experienced, and been told.
    Another alternative would be to allow people to stay in their homes by loosening the qualifications and restrictions for a modification IE: automatically reduce the interest rate as low as possible..put all overdue payments on the back end of the loan and remove any accumulated interest because of default. Make an adjustable a fixed without all the BS., just do it. This would keep people in their homes thereby improving on the real Estate foreclosure numbers. What's the difference if they let people stay in their homes, these properties are sitting vacant and getting destroyed causing a further loss to the banks. It all does not make sense that the banks can't get beyond their greed and stupidity.

  8. Anthony D'Alicandro

    September 6, 2011 at 7:31 am

    Katie, well done. The one area that has been frustrating for me is that I think there is one small segment of housing that could have a positive impact on the economy and ultimately….jobs. The gov't has been trying to figure out a way to fix the problem by helping the troubled borrowers. All well and good for the small percentage that can be helped. But what about the borrowers that are not in default. That have job stability, credit worthiness and good debt to income ratios….but perhaps their LTV is preventing them from taking advantage of today's interest rates.?? There would be an immediate and substantial injection of cash into the economy that would not cost tax payers. That would stabilize home values…and in time have a positive impact on jobs. could policy like this be created with summit?…who knows?

    • Kathleen Cosner

      September 6, 2011 at 12:03 pm

      This could be a good idea, and has been battered around lately. Though on a much grander scale, of making all Fannie & Freddie backed loans rewritten to current interest rates, plus doing cramdowns. It's been suggested that no credit/borrowing power would be taken into consideration. But if that were to happen, values would most likely decline further, if just for a little while. Once values start to go back up, would the owner retain all the equity, or have to share with Fannie & Freddie, and whatever other banks decide to do this?

  9. Barb Davis-Hassan, CCIM, CRS

    September 6, 2011 at 7:49 am

    Katie,

    Great article. Simply stated "this is a jobs and lack of consumer confidence problem..not a housing problem". Thanks to our wonderful Congress (the GOP) and the TEA Party putting our economy into the abysmal over the Credit Ceiling debate, consumer confidence is at all time low. For those of you at NAR that don't know what this means let me spell it out for you.
    1) no job.. no money
    2) a job…but worried how long you'll have a job..no spending
    3) no money no spending

    I don't care how low interest rates are…no job, no money, no spending. The last thing consumers will purchase when consumer confidence is at an all time low is the most expensive purchase of their lifetime….A HOUSE! So friends at NAR…it is not always a good time to buy a house!

    NAR: give up the MID fight! All Realtors should write to their Congressmen/Senators to indicate we will give up the MID if you work towards changing the tax code so that ALL TAXPAYERS/BUSINESSES can benefit from paying less in taxes. I, for one, would rather see lower income taxes, payroll taxes, etc. then worry about the MID. This will stimulate the economy overall and consumer confidence will pick up.

    NAR: fight towards stopping the entitlement programs in DC. Everyone should be paying their fair share in taxes.

    I saw a statistic today that showed Americans approval poll of the U. S. Congress is at an all time low of 13%. Now that NAR is working to change our real estate industry platform from a trade organization to a political party (RPPSI) it's no wonder they want to have a summit. They are now walking, talking (driving across American in big ole fancy buses) and quacking just like the politicians in Washington, DC or the wannabees like the GOP presidential hopefuls.

    Keep up the great reporting Katie…

    • Kathleen Cosner

      September 6, 2011 at 12:07 pm

      While I don't know if this is totally one party's fault, a lot of things contributed the mess, you know, a loan for everybody, and everybody in a home days, in the late 1990's and early 2000's, certainly was one item that pushed things towards the brink. A lot of what you're saying, though, Barb, rings true.

  10. Diana Marshall

    September 6, 2011 at 7:53 am

    There are too many underwater homeowners, at least in the Tampa Bay area where I work. Ignoring the problem won't make it go away. Many are not in any financial hardship so plans are on hold and they are staying put. If one is moving up to a larger home, the loss might be offset. But if one needs to downsize or give up a second home, a short sale usually won't help and in Florida is risky anyway. Non distressed underwater homeowners likely don't want rental status either. There should be principal write down to market value for these folks. There have been bailouts for banks deemed too big to fail, and stimulus money paid to communities to buy up and rehab foreclosures. I agree we need good jobs for the unemployed and underemployed, but the problems so many of our neighbors face today demand myriad solutions and a housing summit to go over the problems is a good idea.

    • Kathleen Cosner

      September 6, 2011 at 12:15 pm

      The programs that have been tried have yeilded little success as of yet. Without jobs the economy is in a standstill due to no spending activity. The more f/c and shorts, the more the values are going to fall, the fewer the home purchases. Allowing people to earn an income to pay their bills, or even buy products, puts money back into the system, and should free up companies to hire, as in, they'll be making more products, more services will be needed, demand goes up.

  11. John Sutphen

    September 6, 2011 at 9:40 am

    As a retired Realtor I have been preaching this for years. Lender's must turn RE into Equity/Rentals or Purchase/Rentals and low, low interest (i.e. l, 2 or 3%) for seven to ten years. My god treasuries are at 0.5%.
    Banker's are just not creative enough. They mostly are greedy and have their heads in the sand. REO's will open up a new industry for the next ten to fifteen years and solve alot of the RE delemma. Many have lost in this market and as I see it, this is their only chance to recover some of the investment back. Not all of it, but hell RE investment always has been always will be a risk investment. Let's move on.

    • Kathleen Cosner

      September 6, 2011 at 12:17 pm

      This is an idea, again that's been tossed around. One of the major hurdles to this, is who takes care of the rentals?

  12. Dean Jennings

    September 6, 2011 at 10:26 am

    Everyone is entitled to their opinion. However, with all due respect to Kathleen, when I get "News" from LinkedIn I expect it to come from an author with real credentials. I have been a full time real estate agent, appraiser, CCIM and developer for 25 years, with a batchelors degree in Real Estate, but do not feel that I have the qualifications to write a national column of personal opinion on LinkedIn, much less one disguised as journalism. Im sorry Kathleen, this is not personal. TO THE EDITORS OF LINKEDIN, YOUR "NEWS" IS A JOKE.

  13. Jackie Thompson

    September 6, 2011 at 10:41 am

    I agree job creation and retention is the main solution. Loan modifications can and should be a major contributor to the solution as well. Modifications have helped many stay in their homes and can help a lot more. The banks must give more permanent modifications at low interest rates. Not temporary ones with only a few hundred dollar reduction a month which so many banks offered in the beginning of this crisis.

    • Kathleen Cosner

      September 6, 2011 at 12:19 pm

      Agree. The whole mod thing is so complex, and takes forever, but if they're doing them, they should be perm.

  14. Chuck Fetterhoff

    September 6, 2011 at 11:38 am

    You're right that businessmen should be part of the real estate market solution. What you failed to report is that REALTORS are the business men and women in the largest industry in the country. Our insight into the housing market is deeper than most. Come on board. Maybe you, us, the President, and NAR can come up with a good idea or two. Worth a try, don't you think?

    • Kathleen Cosner

      September 6, 2011 at 12:20 pm

      lol, my bad. Kinda thought that went without saying. But you're correct.

  15. Corey Toushin

    September 6, 2011 at 6:50 pm

    I agree that creating jobs is a critical elemement to the recovery of the housing market for all the reasons that everyone has mentioned. However, in my opinion there are plenty of jobs available everywhere, just maybe not the jobs most people want or have the skill sets to be successful at. How about trimming unemployment benefits rather than extending them, and spending the money educating folks on how to GO OUT AND GET A JOB! Employers will not hire an applicant because of a spelling error on a resume/application or insufficient technical skills. So, go take a spelling/grammer or computer science class sponsored by the government….wouldnt that be nice. People arent automatically entitled to a job….they have to earn it. Or, extend unemployment to those who can prove theyre being proactive or making some kind of an effort to go EARN a job.

    • Kathleen Cosner

      September 7, 2011 at 12:22 am

      Yes, Corey, there are jobs, but a lot of people, esp those out of work for 6 mo+ are losing their skills, and usually not able to keep up with industry changes. I completely agree that opening up funding to train or retrain is a an excellent idea.

  16. Mike Bowler Sr.

    September 7, 2011 at 11:26 am

    Good article. The Government is totally out of hand. They increased regulations (Staff) by 12% over the past 2 years. Every department in the Federal Government should be put on Freeze for any programs that do not apply to safety and welfare of the country for a period on 2 years. All Federal programs should be reduced by 25% for a period of 2 years, unless they concern Military, Social Security and safety.
    All Federal Parks, buildings, memorials should be reduced in expenses by 25% for a period of 2 years.

    Eliminate the following Departments and turn them back to the States. Education, Welfare, EPA, Justice Department.

    That seems radical, however. It's time to take our country back one state at a time.

    Lastly, eliminate the IRS and the Federal Income Tax and go to a usage tax across the board.

    There you have it. Within 2 years this country would be rocking. 🙂

    • Kathleen Cosner

      September 7, 2011 at 2:38 pm

      Thanks, Mike! Don't you think the time has come for a little radical-ness? It's now or never for the economy.

  17. Suzanne Stephens

    September 12, 2011 at 1:44 pm

    OK, I have a job. (Well, actually, I've been self-employed for many years.) Though I would love to move to a house that suits our needs better, our current home is $85k underwater. How exactly would a jobs summit help me?

    If I wanted to refinance my home (I don't) I wouldn't be able to because it is so far underwater. How would a jobs summit help me?

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