So I am driving my car down real estate road. It’s a very dark road with lots of potholes and obviously in need of repair. I’m hopeful that the government will do something soon to fix the problems, or driving down this road will become downright dangerous and expensive. I think the best way to fix the problems would be simply to fill the potholes with sand, but it seems these days that everyone has an antidote to fix the current problems and what lies ahead.
Earlier this week, President Obama announced his budget plan in an attempt to fix one major pothole in front of us. Unfortunately, one section of that proposed budget plan has the potential to create an even greater obstacle for us to overcome on that real estate road. The proposed budget plan changes the mortgage interest deduction by reducing the amount of mortgage deductibility on families earning over $250,000 dollars per year.
According to the National Association of Realtors, the proposed plan will “lead to a new round of price depreciation, and will cause greater distress on the balance sheets of banks as the collateral value of mortgage backed securities declines,” which will essentially lead to a second credit crisis before the first one is even resolved.
I’m sure there was a collective gasp from all real estate professionals when that was announced. How about this one…
In an interview earlier this week, economist Robert Shiller, considered to be an expert on the state of the
How about a forecast of a further 14.5% drop in home values before we begin to see the turnaround? That was another pothole I hit coming into the office the other day. That number is further compounded by the fact that home values nationwide have already plunged almost 27% from its peak in June, 2006, and over 19% in the past year alone. So doing the math, we are looking at a 40% drop in home values before this thing is through???
It’s no wonder that the mental state of the housing market remains somewhat like the psycho ex-girlfriend I dated back in my college days. Consumer confidence in both the economy and the housing market will need to make a strong comeback before any of the plans set forth before us will even begin to work their magic. Whatever the solutions that work will be, no one said the road to recovery would be an easy one. I think we all realized it was going to be bumpy, but we never expected it to be replete with as many potholes as we are now experiencing.