Some see plan attacking root cause, but others believe cost is too high
RISMEDIA, September 29, 2008- (MCT)-In the wake of more gloomy home sales statistics Wednesday, builders and real estate agents have begun to debate whether the government’s $700 billion financial industry bailout will end the slide.
Many analysts believe the housing industry, both here and nationally, is being slowed by homeowners’ difficulties in getting mortgages. The expectation, then, is that a federal stabilization plan for banks will get money flowing again and stop the national slide in property values.
Others, though, argue the cost of the plan is too much to bear. And some believe its impact on the Capital Region would be muted because the housing market here hasn’t slumped as it has in places like California and Florida.
“I’d like to think that there’d be some big impact (from the plan) that would totally reverse the real estate flatness in the Capital Region,” said Scott Varley, owner of The Scott Varley Group agency in Saratoga Springs. “But I don’t think it will really change it at all.”
The debate comes amid more evidence that the housing market is in a tailspin. The Greater Capital Association of Realtors Inc. reported Wednesday that August home sales were 20 percent lower than a year ago, while the region’s median sale price dropped 2 percent.
“It’s not a terrible market,” said James Ader, CEO of the 11-county trade group in Colonie. “But it’s not a real good market either.”
National numbers released Wednesday were also gloomy. The National Association of Realtors said the median price for existing homes fell 9.5 percent in August to $203,100 — the largest price decline recorded since 1999.
Many economists, including NAR chief economist Lawrence Yun, believe tight credit is killing potential home sales. Realtors, including Varley, say the impact of tight credit is being felt locally, too.
Robert Blackman, vice president of development for Realty USA in Clifton Park, said many prospective buyers are discouraged by the hurdles required for a mortgage. And recent Wall Street gyrations have not helped either, he said.
“They’re almost defeated before they begin,” Blackman said. “Hopefully, something will happen in Washington that will … take some of the pressure off.”
Some analysts, including Yun, predict the federal takeover this month of mortgage giants Fannie Mae and Fredde Mac could make credit more available, because the agencies tightened the money flow when their future was in doubt.
Others caution that it’s risky to pin hopes on the $700 billion bailout until final details emerge. The bill is the subject of heated debate in Congress.
Many Democrats want it to include help for homeowners facing foreclosure.
“That would attack the root of the problem,” said Marisa DiNatale, senior economist at Moody’s Economy.com, a research firm in Philadelphia. “We’re seeing record numbers of foreclosures, and it’s just adding to the supply of homes on the market.”
Still, uncertainty about the economy could hurt real estate sales, no matter what Washington does. Surveys of consumer confidence, both nationally and in New York state, showed people were skittish about spending money even before the recent Wall Street chaos.
“People in general have been more pessimistic about the (prospects for) the economy over the next year or so,” DiNatale said. “People might not be willing to jump back into the housing market.”
Some in the housing industry had hoped the Housing and Economic Recovery Act of 2008, passed by Congress earlier this year, would kick-start home sales. The bill provides up to $7,500 in new tax credits to first-time homebuyers who purchase before July 1, 2009.
But the bill hasn’t boosted sales, perhaps because it requires that buyers repay the tax savings within 15 years.
“The tax credit just wasn’t strong enough,” said Pam Krison, executive officer of the Capital Region Builders and Remodelers Association, a trade group. Churchill can be reached at 454-5442 or by e-mail at email@example.com.
Copyright © 2008, Albany Times Union, N.Y.
Distributed by McClatchy-Tribune Information Services.
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