Santa Rosa Home Prices and this real estate market are buoyed by a tsunami of cash! Wow! The government just raised our budget deficit cap AGAIN! 12.4 Trillion Dollars!! This government has been subsidizing real estate for years! We had silly money replace 20% down, allowed wacky debt to income ratios, and everyone from the lowly mortgage broker and Realtor/agent to Moody’s made a ton of dough in the process! We had NO checks and balances.
Now we have major subsidies in the form of a government which knows without a housing recovery we are in “deep doo-doo” (to quote Ross Perot!)
The government just extended the first time buyer credit plus gave a conditional nod to the move-up buyer but giving them a $6,500 move up bonus! But is this enough? Does THAT get the reluctant move-up buyer OFF THE COUCH? The IRS gives us 1031 Tax Deferred Exchanges which are still manna from Heaven for an investor! You can defer gain forever! You can buy real estate out of retirement funds. Depreciation still exists! Interest deduction too! And now it seems if you go belly up the government will mandate you be given a loan mod (with 66% default rates!) or a principal and Interest write-down (only 26% default rate then!) Those owning or seeking to own Real Estate are spoiled rotten!
I took a gander at long term interest rates going back to the 70′s and realized I spent 2/3 of my Sonoma County real estate career in double digit interest rates! I remember doing a 6 point buy down plus 6% to the Realtors for the sale–12% points to move a property and we bought the rate down to 10.75%!! We even had two roaring markets during those crazy high interest rates. And folks are WARNING OF 6% as some sort of Armageddon? C’mon!
In this market Price is king. Keep Sonoma County home prices down and the buyers will come. Let’s “rate” the various “Foreclosure/REO markets” and give them “zones”. The imitable Carole Rodoni, in one of her usual lively lectures, rates the various REO markets by assigning them “grades”. Detroit–take a guess! It needs all hands on deck to get the housing market back to either renters or new homeowners. Here government intervention may be further needed–subsidies for investors, more money for homeowners, etc. My area of Sonoma County–We are an “A” market–we can take all the REO’s thrown at us! We swallow them up! Waiting lines, multiple offers! No need to subsidize out here–keep the prices down!
Santa Rosa real estate buyers can still obtain plenty of “dumb” money in which to finance their home! If a property is a Fannie Mae REO/foreclosed home—Fannie Mae offers the Homepath Loan: 3% down, NO appraisal or HOA certification needed! FHA 3.5% down (for now!). Let me ask you folks a question? Would YOU make a LOAN with only a 3 or 3.5% equity stake in this marketplace?! If you said yes, CAN WE TALK? But seriously–How many Trillions more will we need to buoy this Real Estate Market before it gets kick-started and starts to move on its own energy? 12.4 Trillion And the elevator ain’t anywhere NEAR the top of this building!