I have commented many times on the fact that without a strong real estate recovery, any recovery of the rest of the U.S. economy would be weaker. It’s certainly not all sunshine yet, but things are looking up:
Maintaining this positive direction is important for all of us. With that in mind, I recently posted an Open Letter from RE/MAX Chairman Dave Liniger that included several steps that are needed now. I’ll highlight two:
- Extend the Mortgage Forgiveness Debt Relief Act, now scheduled to expire at the end of 2012. Without this, loan modifications and short sales will not be viable alternatives to foreclosure for many Americans. In fact, foreclosure could become the preferred option for many, if the alternative is a short sale followed by income tax liability for the amount of the forgiven mortgage debt. Not only would this reduce home sales, but the “shadow inventory” of foreclosed or soon-to-be-foreclosed properties would continue as a drag on long-term recovery of the real estate sector.
- Loosen unnecessarily stringent mortgage lending rules. Nobody that I know advocates a return to the lending standards that led to the housing downturn five years ago, but it is a fact that many quite acceptable loan applicants are being declined today because of government regulation that pushed the pendulum too far the other direction. Mr. Liniger’s letter pointed out that “In August, the average FICO score of a rejected mortgage application at Fannie and Freddie was 734 …. And the average down payment of a rejected applicant was 19%.” Thoughtful extension of credit to deserving borrowers could accelerate the housing recovery and bolster the overall economic recovery.
We are getting more and better news about real estate these days, but home sales are still far below their pre-recession levels, many major cities still have unthinkable inventories of vacant homes, and for all their renewed confidence, builders are nowhere near the pace of a few years ago.
It’s great to be in Austin, Texas, where the housing downturn was much milder than elsewhere and where the recovery began almost 1 1/2 years ago. But our continued strength, and the strength of the U.S. economy, depend on a much broader real estate sector. Help to advocate these changes now — talk to friends and business acquaintances, and most importantly contact your representatives in Congress. These changes are needed this year!