Commentary by Thomas M. Stevens
RISMEDIA, January 30, 2009-To jumpstart the economy, you have to gain consumers’ confidence back. Talking about stimulus packages is confusing to most Americans. As a matter of fact, when the Federal Government talks about bailing out another bank, investment company, auto manufacturer or insurance company, the American public just gets angrier.
I’m not saying that things like these didn’t need to be done, but in my 36 years in the real estate industry, what has led us out of the four recessions/downturns that we have been through has been housing. The sooner the government realizes this and does something for the people of America, the sooner the economy recovers.
If the Federal Government were to announce a buydown/subsidy (4%) of interest rates for anyone buying a home over the next two years, announce that they are going to stop foreclosures for a period of time (six months) until the paper can be rewritten and make the $7,500.00 tax credit announced earlier a true credit versus a loan, the quicker America starts to heal. This will reduce inventory and stabilize prices.
Sitting, waiting and watching for interest rates to slide down only holds consumers out of the market as they wait for the bottom. But announcing a buydown will change the thinking of American consumers to the point where they say, “I better buy now because rates aren’t going to go any lower.” The American public will finally recognize the government is doing something for them and it is simple enough that they will understand it, i.e. “I am not going to lose my home” or “My son can now afford to buy a home for his family,” etc. Immediately a positive attitude will develop across this country.
What this “Gift to Americans” also does is jump start the economy. Each 1% reduction in the interest rate will result in 500,000 to 700,000 additional homes sold, not to mention that on average each time a home sells an additional $76,000.00 is pumped back into the economy. This equates to trillions of dollars being pumped back into the economy.
When that happens, people will have money to buy things like cars and auto manufactures will no longer need to be bailed out. This needs to happen sooner rather than later. This would be a win-win for all concerned. Democrats, Republicans, the Congress, Treasury, FDIC and the Federal Reserve could all take credit for coming together and uniting our country. We certainly need it!
Thomas (Tom) M. Stevens, CRB, CRS, GRI, was the 2006 President of the National Association of Realtors.