In August of 2010 the National Association of Realtors released a research study highlighting some of the social benefits of homeownership.
Their list included:
– Homeownership stabilizes neighborhoods.
– Homeowners are more likely to participate civically.
– Homeownership produces higher life satisfaction.
– Homeownership fosters less neighbor crime.
– Homeownership and housing stability lower teenage pregnancy and public assistance.
– Homeownership fosters quality property maintenance and improvement.
Most recently the NAR released these timely reminders:
“Good jobs enable people to achieve the American dream of home ownership. And every time a house is built, bought, or sold, jobs are created-lots of them-right here at home.”
– Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, a job is created.
– Each home sale touches 80 different occupations.
– Every home purchased pumps up to $60,000 into the economy over time for furniture, home improvements, and related items.
– Housing accounts for more than 15% of the Gross Domestic Product, making it a key driver in our national economy.
– Housing has led this country out of six of the last eight recessions.
“America needs jobs. Housing creates jobs. That’s one of the many reasons home ownership matters to people, to communities, to America.”
“Strong federal government support of home ownership equals strong support for American jobs. We urge the Obama Administration and the U.S. Congress—as they debate the new federal budget and reform proposals for the nation’s mortgage finance system—to continue federal support for home ownership.”
“Jobs and Home Ownership. You can’t have one without the other.”
The US Senate just approved another $2 Billion for the auto industry’s stimulus program referred to as “Cash for Clunkers” after the first $1 Billion was used up last week in only 3 days. It seems, at first glance, that this auto industry bail-out program might be having some positive affect on another ailing US industry. At least the players are allowing the program to work. The Feds are giving away money (whether you agree with this approach or not), the dealers are accepting the qualifying vehicles and giving a $4,500 trade-in allowance toward a new qualifying car, and US consumers are using up the allowed funds to work this program.
The housing industry has witness many attempts by the Feds to “jump-start” the stalled industry for the past 12-18 months. One of the first was the FHA Secure Program with “impossible to qualify” underwriting guidelines for those who had made late payments on their adjustable mortgages. Most of the national wholesalers were not participating and none of the FHA participating lenders would approve these borrowers for this program.
The Troubled Assets Recovery Program (TARP) initiated by then Treasury Secretary Henry Paulson and President Bush and expanded by the Obama administration attempted to infuse cash into the ailing national and regional banks so they would be more willing to free up credit to business owners, home owners and borrowers. However, with the expansion of this TARP program came the announcement that the Feds could jump into the books of any bank who received these funds to determine if they were “financially solvent enough” to avoid a federal government take over. Some banks refused the money, others returned it and most who received it held on to it to bolster their bottom line figures. Either way, no credit was freed up and no home owners, home buyers, home builders or Real Estate industry players have received any relief from such a misguided and over funded Federal effort.
The recent announcement by President Obama to design a federal loan modification program has been met with delays and unresponsiveness by Bank of America and Well Fargo – the nation’s two largest remaining banks holding the largest number of servicing rights on most of America’s residential mortgages. On the one hand, these banks appear very unwilling to work with their customers to write down loan balances or interest rates to keep the existing home owner in the home, and yet on the other hand, they are all saying that they do not want any more foreclosed properties and the process of foreclosing on US homes is causing home values to dive bomb unlike anything we have ever experienced.
The one program still being promoted – “$8,000 tax credit of first-time homebuyers” – is far too limited in its scope. This author was calling for this approach long before the Feds rolled out their version. However, we were calling for a tax credit for any down-payment and closing costs used to buy a house by ANY buyer. Only this breadth of a program which would include Real Estate investors, buyers of second homes and “move-up” or “move-down” buyers will truly have any effect of the most critical industry in our downward spiraling US economy.
Again, I am calling for the inclusion of those solid borrowers, experienced buyers and business owners to be enticed to get off the sidelines and risk THEIR capital (rather than the future Federal tax revenues for generations to come!) to help get the housing industry out of the dumps.
The average first-time homebuyer is still too scared and too inexperienced to be a major player in rescuing the ailing housing industry. They are fearing for their own job security and seeing house prices plummet causes them to be squeamish about investing what little cash they can scrape together to buy something which may be worth less than what they paid in 2-3 years when they might be ready to sell and buy something bigger or in a different location. This group of buyers does not have the “staying power” to be the key to a housing industry recovery. Bring in the Pros! We need the seasoned home buyers and investors to be encouraged to buy up the housing inventory busting at the seams so builders will be enticed to start building again.
In the meantime, those who desire to take advantage of the $8,000 tax credit have less than 4 months to get their first-time home purchase selected, financed and closed. This is not much time in light of heightened underwriting requirements, appraisal delays and turn times in wholesale approval processes. Those who can benefit from this limited time tax credit must move quickly to get the benefit of the $8,000 “give-away” by the Feds.
If you or someone you know has not owned a house in the past 3 years and desire to buy a house before the end of the year to take advantage of this $8,000 refund of all tax withholdings during 2009 and an outright rebate of whatever the difference is between what has been withheld and $8,000, they must get into the game quickly by contacting a Certified Mortgage Professional to get pre-qualified before going out to shop for houses with a Realtor. The clock is ticking. There is no promise that the Feds will extend or revamp this program once it expires on December 1, 2009, regardless of how many housing experts, like this author, call for a program which will really help the struggling housing industry. Sellers are motivated to sell, there is a record-breaking level of houses included in the existing home inventory, and Realtors and Certified Mortgage Professionals have time to give a first-time buyer the time and attention they need to make a great choice to get into (or back into) the housing market.
The good news is – no “clunker” trade-in is required to participate in this cash give-away. You can buy anything you want and still get the $8,000 tax credit – a cottage, a castle or a condo! COME ON DOWN! You’re already a winner!
Earlier this week I spoke to a prospective borrower who wanted to refinance his house after an unusually long and drawn-out divorce which was finalized in July of this year. He kept the house and she was awarded $25,000 in cash from the “equity” in the house which, I was told, appraised at more than $920,000 one year ago! He “only” owed about $830,000 on his house, so “on paper” this looked like a pretty “fair” arrangement.
The only problem with this “$25K-worth-of-equity-to-the-ex” scenario was that his house is now only reported to be worth about $780,000 on an online home valuation website, or about $50K less than what they collectively owe this house with 5 bathrooms which they bought 7 years ago for only $600,000. His quandary was only further complicated by the fact that he has had a couple of recent business failures and had only just started another new business 3-4 months ago in a very fickle industry. No wife, no income, no business and a house that is pulling him under financially – that he is stuck with! This sounds like another country music song in the making! Hold on….. I’ve got it! “My Home is a Man-Wrecker!” (You heard it here first!)
Last month I attended a legislative work-session in Nashville with a couple of key state legislators and leaders from the housing industry (mortgage brokers, mortgage bankers, home inspectors, appraisers, and Realtors) to meet with an Obama-Harvard-Law-School-classmate-yearbook-toting-attorney-turned-Realtor-from-Illinois who was asking for feedback from several of us in the state regarding this very dilemna – couples (especially women, I assume) being wrecked by their houses after their divorce was finalized. (Yes! She REALLY carried in her yearbook and she was on the same page as the new Prez!)
We were told that too many “newly-single, fresh-starts” tried to hold on to a house which was beyond their means and were emotionally unable to swallow the idea of ditching the “loser” and also having to move, at the same time. The desire to keep the kids in the same school, the dog in the same yard and the satellite dish on the same roof tended to outweigh the conventional wisdom that, in most cases, one less income (even with some child support coming in) can not usually keep up with the same sized house payment. We heard that the problem is that the remaining spouse is usually given 2-3 years to refinance or sell the house and maybe split some equity or to hand over the 401K to the departing spouse in trade for the equity to be realized by the remaining spouse at some time in the future. (Sounds like a great deal, huh?!)
Whoa! How ’bout that for a series of gut-wrenching assumptions in world which has turned topsy-turvey during the last 2 1/2 years! House appreciation, job security, stock market stability, and credit profile integrity. All of these can be uncontrollable variables which will either make it possible or impossible to ever get the departing spouse off of the mortgage – regardless of whether he or she “quit claims” (takes their name off of the house title work) their ownership interest to the remaining spouse. This is a formula for certain financial ruin. Why was it when a young couple stood before “God and in-laws” and promised “til death do us part” that we thought they meant each other rather than the half-million-dollar house they think they should hold on to even when the judge orders them to split it all and move on. (Surely, he didn’t REALLY mean to get rid of the house!)
The Obama classmate was advocating new Tennessee laws to require divorcing couples to get “free” mortgage approvals, home inspections, appraisals, and title searches to protect the remaining spouse from future calamity because of unexpected deterioration of the house, liens against title, over inflated assumptions of value and the inability to qualify for a mortgage – any of which would ruin the hope of making the decision to keep the house a good one. (That 401K or IRA is sounding better and better, even in this market!)
We didn’t all agree about which law would be best or even if new laws were necessary at this point. We all agreed that this was a big risk and all that parties needed to be informed of the dangers of keeping a house after a divorce. We just didn’t agree about what could be done and how much legislation should be piled on an already very litigious process where attorneys and judges are already deeply involved in the personal “affairs” (no pun intended!) of two disappointed adults who thought they could beat the odds and make it through the long haul – with their combined accumulated wealth intact to the end.
It seems to me that couples should usually get rid of the house – especially if there is still a mortgage on the property. Cleaning up that kind of mess is never as easy as one might think and could often take longer than most second marriages last! However, in this period of declining home values, limited credit options and an unstable employment market – buy and selling houses has almost come to a stand-still in some markets. This will cause housing markets to be flooded with inventory and homes to stay on the market longer and longer – bringing down the sales prices of homes which “must sell” to make way for a final divorce decree and marital dissolution agreement. Years of accumulated equity in the family home may be sacrificed and never regained if a home is sold – no matter what. This causes the houses in the surrounding neighborhood to also depreciate in value and should remind all readers that a marriage failure does really hurt the WHOLE community in MANY ways.
In my 10 years of working with home buyers from all walks of life I seldom see one who comes out any better after a divorce. The truth is – we’re all a bunch of rascals and we all blow it, from time to time. Maybe this slow-down in the housing market will give some angry couples the opportunity to “cool down” and think through the consequences of throwing a marriage away while they wait for their house to sell. Maybe they’ll realize that for the sake of their kids, their parents, and their own integrity that they promised “for better or for worse, for richer, for poorer, in sickness and in health” – not to the house but that one on the other side of their “sleep number” mattress.