Is the Stimulus Working? Posted by Steve

Like many of you, I was somewhat taken aback in the economic stimulus package Congress passed and President Obama signed. I was hoping that we would see better and bigger incentives to encourage people to buy now. I wanted Congress to pass legislation that would make this market we have lived in for the past 20 months turn around fast. In short, I wanted more.

Since that time, here is what I have experienced:

Two of my listings, each of which have been on the market for the past 8 months, sold almost immediately to two first-time home buyers.

More of my fellow agents – many of whom stopped working altogether – are now coming back into the office. They are calling clients. They are sending letters to their sphere of influence telling them about the housing provisions in the stimulus package and the benefits.

In office meetings, there is an air again of excitement, albeit tempered, and a feeling of hope again.

And despite the continued bad economic news that we hear about on television and read in the papers and on the internet, there is notion that we will get on with our business, because people have to have a place to live.

Will the Housing Stimulus package get us back to the good markets of the late 1990’s, or possibly the boom markets of the second millennium? No one can answer that – at least not now. I do know that the package has helped, at least a little bit.

But …and this is a big BUT…now that the first steps toward recovery have been taken, we can’t afford to take any steps back. I am disappointed that the Obama Administration has proposed reducing the value of the mortgage interest deduction (MID). I am even more concerned that the Administration does not seem to realize the residual effects of limiting MID.

NAR has extensive research on the negative consequences of changing MID. A decrease in the MID for homeowners making $250,000 or more would negatively impact home prices across the country. It could worsen the credit crunch. In short, the effects of this proposal don’t just hit the “rich” — they trickle down directly to every price point in the market and every income range.

The bottom line today is that the very segment of the economy that has been hit the worst in this recession does not need another punch in the the stomach, especially if we need that very segment of the economy to lead us out of this recession.

For now, I will take what I have been given and make the most out of the incentives that are in place. Certainly if MID is perserved, there is hope that the market will recover. Don’t take that hope away, Mr. President. – Steve Brown, VP & Liaison to Committees

Comments
  1. LeRoy Abplanalp

    Steve Brown what you just stated is exactly what will happen if the president takes away or reduces the tax deductions of interest and real estate taxes. Mr. President if do that, there is no real incentive for people to own their own home.

  2. Barbara Christensen

    Regarding Steve Browns comments on the stimulus, we are seeing a burst of activity in our market out here in Willmar, Mn. I too thought why not a bigger stimulus, but from what I am seeing, hopefully what we have in place, will stimulate more that just the FIRST TIME HOME BUYER’s market, in that when these homes in THIS market range get SOLD it opens up the MOVE-UP BUYER market for the folks who have been sitting on their houses for months, and WANT to move up. I’ve been in real estate for 22 years now, and I am excited to see what this stimulus package can do.
    You guys have a great day! 🙂

  3. Dear Steve: I’m shocked, shocked to see that the Socialists the NAR gang lay down with have given NAR & Realtors fleas. Of course the Obama administration is going to punish wealthy homeowners, they are evil and deserve to be brought low (everything must be made fair for all). But once they get done bring the wealthy low, who will pay the bills??? Don’t forget, the $250K is a family, single folks will see big tax hits at the $150K range. The middle class and and lower tax brackets will be next. AND…just wait until the next round of Carter style inflation on Obama steroids hits. Will you be able to help us sell homes with 15% interest rates to “po” folks who make less than $250K? Maybe NAR should back fiscal policy that makes sense to a first year econ student. Tom

  4. Ray Chan

    Steve – you have been grossly mis-informed and your statics are wrong about the reduction of mortgage interest deduction for people making over $250k/yr.
    There’s no direct or indirect correlation, other than political purposes, between the reduction of MID for the rich and movement in the housing market; none whatsoever.
    The data you’re using is likely from the conservative right-wing who’s manipulating and mis-informing the public.
    Please do not spread wrong information.
    The NAR is making the same mistake, to which I have sent NAR my comments.
    The NAR’s chief economist Larry Yuen will not support this claim in his right mind.
    Reduction of MID for the rich WILL NOT affect the poor; zero correlation.
    I appreciate your attention on this issue.
    Ray Chan

  5. Personally I am becoming quickly disappointed that the gov(and apparently the NAR) leaves out that the incentive is “up to” $8000 in their media advertising in regard to the tax credit. Too me it is just one more way that the average consumer is being deceived about just how much of a tax credit they are really receiving. The consumer doesn’t like surprises like that, and as a member of the NAR, I don’t appreciate that kind of deceptive advertising. Why not just say what it is? I feel that just keeps the buyer further up on the fence. And guess who gets to break the news…

  6. Maria Peace

    You guys need to listen to some cleaner journalism that is not controlled by bankers and the oligarchy. Try reading salon.com, particularly Glenn Greenwald’s column, and Paul Krugman who is disliked by both Bush and Obama-he is Nobel prize economist who shares some interesting insights about this whole deal. Other good newspapers are the Manchester Guardian and Christian Science Monitor. The reason these guys are clean is that they send reporters on the spot to report and don’t rely on propagandistic news bureaus. They report it like it is.

  7. The market prices in Casper Wy has so far help up well when compared with the rest of the economy. However it has been very slow with days on market going up better than 300%. I am not sure the stimulus has helped but at least getting some positive national news versus such doom amd gloom from the media has probably helped. We are hurt more by the tightenedlenderrequirements.
    My real fear based on my college economics is throwing so much money into the econoimy which can only lead to inflation in the next few years. 13,5% single family rates anyone? I have been in real estate since the late 70’s and remember the killing rates. But then we could assume or wrap mortgages which we can not do now.
    And what sort of action will have to be taken to sop up all the excess liquidity?
    Rose Dennis

  8. Scott Reed

    We all know that the market has not hit bottom, you would have to be on another planet not to realize it if you are a Realtor. However, people like Donald Trump should not be saying that the market has 2 more years before we hit bottom. (as he did on O’REILLY the other night)The general public doesn’t really know what sales are in their area unless they have had a Realtor give them good quality information. Just ask any of the general public how many houses have sold in their area? You will be surprise how low that number is. In my area, I have asked that question and the highest number I got was 75 when we had already sold over 400 homes at that time. You see, the public listens to THE TV NEWS MEDIA and believes every thing they hear. Suze Orman is another person that is on TV all the time with her financial advice.(remember she is on TV to sell her product,she makes a lot of money doing that) She stated..for anyone making an offer on a house, to make an offer at half price. You were stupid if you didn’t.Way to go Suze…that helps everything! Here’s the problem. Buyers are trying to do that and getting no where in beliefs they know what they are doing. The majority doesn’t seem to care what the SOLD comps are. They are simply looking for a JACKPOT deal they can tell every one about. They just don’t realize that if they run across a Seller that is desparate to sell and accepts their offer. They have just brought the house prices down in the neighborhood they bought in and around that area and just gave a NEW SOLD comp for the next appraisel on the next property for sale. Hence, bringing the property values down to their level and turns out , their price they purchased for isn’t such a good deal after all! SNOWBALLS anyone? You see the TV NEWS MEDIA just doesn’t know when to shut up. You know when you were growing up, the kids that told tattle tales …these are the people that are now News Anchors evidently.They think you should just hear every little stupid thing.
    Another thing about the Real Estate market is the higher end market. Let’s say homes above $800,000.(this differs in areas) There are so many homes through out the south above this amount (a lot vacant) that will drive the prices down even more. Buyers are waiting for this. Look around and do your searches on the MLS in Georgia, Florida, Alabama, Tennessee,even Texas for instance and watch it for 2-3 months. you will see what I am saying.I have been watching it for 2 years now. The high end market are owned mostly by people who have lost a lot of money in this economy and are needing to get rid of these properties soon. They may be more financially fit, but they only last as long as their money. At some point in the future, they will let these go cheap. Why should people making over $250,000 be penalized for making money and why should they have to spend more money to give to the poor? The MID should be given to eveyone fairly. I’m sure anyone making anywhere near $250,000 will not want to work as hard to make that amount if they are going to penalized. If it wasn’t for the people in this country making that kind of money, most of us wouldn’t have jobs. So, yeah I guess that is what this government wants to do is make the Wealthy take care of the not so wealthy. In reality, that is what America has done for years. Try to brainwash the American people to feel sorry for everyone else not making any money or not working or wanting to work or the ones that just want to get pregnant and live on welfare and government programs. It’s simple, America cannot keep up or pay for all of the worlds problems and we sure don’t want to be giving money to other countries until we save our own. Example”..if you owned your own company and it was not doing good financially…would you give cash to another company so they could prosper? Dah!
    The moral of this story and economy is simple….The American has to have a cash flow to make it work. If the Government is not willing to help the Tax paying Public put cash in their pocket, they are wasting our time and our tax dollar. You can give all the bailouts you want to, but it only delays for a short period what would have happened anyway. Bancruptcy for most.
    There are too many banks. Some of these will be bought up anyway by the stronger banks and others need to fizzle out. Too many banks were building new banks in an already bad market a couple of years ago. Stupid move and I wouldn’t do my business at these banks. Goodness, would it be some of these banks needed bailout money? I bet.
    We will have problems until we vote for people who actually have good intelligent business sense. Just because someone has a degree doesn’t make them a smart business person. Look at all the LAw Firms that have went out of business.
    When I heard Michele Obama say that it was the first time in her life that she was proud to be an American. Did she mean she is glad that the deficit will double or did she mean she was glad her husband had a $400,000 a year salary and retirement income and a tax free expense account and 10 years of top security protection? I’m confused about that statement!
    To answer in short…is the stimulus working? no because property values are still falling. The stimulus we eat us up in a couple of years. The people that are for spending all that money….well go ahead and pay my part since you are so rich!

  9. Dear Steve:
    I like your ideas but Coldwell Banker CEO Jim Gillispie wants to see $15,000 tax credit for ALL primary home buyers and suggests a 12-month fixed APR of 4.25% or 4.50%. His rationale is that stimulus money aimed at first time home buyers reaches too few buyers while studies show median to upper homebuyers will spend on the average $63,000 in home-related improvements – money that flows straight into the local ecomony. View and hear his comments on Fox Business: http://www.foxbusiness.com/video/index.html?playerId=videolandingpage&streamingFormat=FLASH&referralObject=4538825&referralPlaylistId=1292d14d0e3afdcf0b31500afefb92724c08f046

  10. Stanley Cobb

    The stimulis package is a bunch of propaganda and hogwash. It does nothing to create jobs in the private sector, only more government growth. Look at GM and Chrysler. They are now government owned entities. Barney Frank and his ilk created the housing crisis, and Hussein Obama is making it worse.

  11. Alan Forbes

    Mr Chan :
    I am shocked to hear your commments on the MID! You know you are next. I don’t know how much you make or how much your home is worth today, but after the $250,000 limit, the next limit will be $200,000 and on down the ladder until it includes you and people below your income and housing affordability level. Who should decide whether a person is entitled to deduction? A deduction should be just that..an equal, fair, for the people, by the people deduction. It should belong to every hard working, home owning person regardless of their income. The money saved by that deduction is spent on goods and services that drive the economy and create jobs. I expect that with a better economy, those who wish to work can perhaps find work instead of welfare. In addition, there is nothing that affects the economy more than a bustling housing market. This deduction to EVERYONE who owns a home is a reward for taking the risks associated with owning property. Property has to maintained, repaired, occupied (often by folks who have no regard for others property), and taxes have to paid ( so you can have your social services). This risk is clearly evident today reflecting the huge losses all property owners have taken over last 20 months.
    You are simply wrong!!
    Alan Forbes

  12. Irma

    The $8000 tax credit for first time homebuyers has helped me 0%. I have sent postcards, called clients and anything else I can think of to get buyers to buy, but they are not biting! The buyers, first-time or otherwise, are not moving unless it is absolutely essential, and all the sellers are getting ripped off in order to sell.

  13. Interesting read and interesting comments as well. I’ve seen an “uptick” in my business in Indiana, but then again I do every April 1st. The stimulus “package” is a difficult issue for me, as a Realtor I naturally want my business to thrive, but as an American taxpayer I’m positively sickened by the government intervention and the obscene amount of debt these ridiculous programs represent. I survived the Carter years, but let me tell you it was ugly sitting on 4 spec houses with 18% mortgage rates.
    Like Steve, I’ll take what I’ve been given to work with and make the most of it, as we all should.
    As an American taxpayer and a capitalist at heart, even though I’m a realtor, I think we’ve made HUGE mistakes as a society with Fannie & Freddie backed housing for anyone with a pulse. I actually felt some relief when the zero down FHA programs went away, as I believe strongly the more invested monetarily a buyer is in the deal, the better the odds they’ll understand the responsibility of homeownership. Now that FHA is 3.5% minimum, we’ve got the Rural Development zero down, so we’re going to do it all over again, and again and again. I would like to see PERSONAL RESPONSIBILITY become part of our society again, and our government worry about terrorism & borders, not Real Estate, Banking, Insurance, and Autos.

  14. It was President Obama who said “we’re not going to help the speculators” (this means business people). The tax incentive was for first time home buyers only. What do first time home buyers buy? First time homes. What do investors sell? Primarily, first time homes. Therefore, that is the exact group of people that got bailed out with this incentive program. Along with the lenders who made speculative loans to the investors.
    It used to be the first time home sellers would “move up” but in our market 40%+ of the first time homes were already vacant because they were owned by investors. This isn’t driving sales in the upper end at all. This is another example of Obama “class warfare” politics, another attempt to harm the American middle class and it isn’t enough to fix the housing market.
    His next plan to reduce the MID is going to again be disastrous for the average American. Wake Up America! Who put this socialist in office anyway?

  15. Connie Roberson

    I feel if the Mortgage Interest Deduction comes about, it will have a great impact on the Real Estate Market. I think a flat tax across the board is the real answer. If tax issues are not done in a fair manner, not only will it bring the Real Estate Market to it’s knees, it will bring America to her knees. Which is happing right now.

  16. I am not sure what more can be done for first time home buyers other than giving (more taxpayer debt) them a insurance policy saying the Government will pay their mortgage if they lose their job. Confidence is the problem right now.

  17. Brenda Seagraves

    No the stimulus is not working. Banks are not making loans in adequate portion to stimulate the real estate market. Additionally, the blemished credit from perfectly legitimate borrowers will prevent future borrowing at any reasonable rate. Once the credit market opens up there is likely to be so few borrowers “able” to qualify for a decent loan that we will find ourselves in an equally distressed market. Banks will be ready to loan but the borrowers won’t be able to qualify. A similar situation happened during Dessert Storm and then right after 9/11. It took nearly 18 months after the credit markets opened up post 9/11 for reasonable people, with blemished credit and unstable income per their tax returns to be able to get a loan and then, the rate was distasteful. This especially effected self-employed people. So the question is what is the government or the NAR going to do to address this problem.

  18. Dennis Johnston

    Mr. Brown,
    What is a “liaison to committees” – another layer so no has to talk to anyone? Will the stimulus package work? It is way too early to tell. Is it the best approach, maybe not but it is the only one available. Is it necessary? Yes! The Bush Admin. left no other choice. Loosing 150,000 jobs per week could not go on forever. You folks are sounding a bit like Herbert Hoover who
    was a great and honest man as a public
    servant to the country, but a poor President.
    It would be nice to see a little less of
    the constant self congratulation and
    more solid ideas that might actually
    help even if it didn’t make you personally rich.
    And now a little heresy: What we need
    is prices tied to value not speculation,
    serious efforts at a fully effective general building system at construction,
    not just energy efficiency, but energy
    self sufficiency with each building, and
    life time warranty on every building.
    Enforcement of this warranty by an
    independent warranty agent without
    ties to the contractor, buyer or insurer
    through mandatory arbitration. In the
    case of arbitration parties would split
    the arbitration costs 50% / 50%.
    This approach may seem a bit tough
    now, but you would love it once it is
    in place for a while.
    Dennis Johnston

  19. Dennis Johnston

    Mr. Brown,
    What is a “liaison to committees” – another layer so no has to talk to anyone? Will the stimulus package work? It is way too early to tell. Is it the best approach, maybe not but it is the only one available. Is it necessary? Yes! The Bush Admin. left no other choice. Loosing 150,000 jobs per week could not go on forever. You folks are sounding a bit like Herbert Hoover who
    was a great and honest man as a public
    servant to the country, but a poor President.
    It would be nice to see a little less of
    the constant self congratulation and
    more solid ideas that might actually
    help even if it didn’t make you personally rich.
    And now a little heresy: What we need
    is prices tied to value not speculation,
    serious efforts at a fully effective general building system at construction,
    not just energy efficiency, but energy
    self sufficiency with each building, and
    life time warranty on every building.
    Enforcement of this warranty by an
    independent warranty agent without
    ties to the contractor, buyer or insurer
    through mandatory arbitration. In the
    case of arbitration parties would split
    the arbitration costs 50% / 50%.
    This approach may seem a bit tough
    now, but you would love it once it is
    in place for a while.
    Dennis Johnston

  20. Irene Faucher

    What is needed is an investor stimulus of lower mortgage rates for buyers who are willing to buy and repair 2 or more units to be used as rental units, thereby taking them off the hands of the banks who own them. We have too many vacant properties, ruining neighborhoods. It would also help to give an income tax credit to anyone purchasing an American automobile or other American-made goods. Reducing the exhorbitant mortgage closing fees would also encourage buyers.

  21. Anne Meczywor

    I am THRILLED with the results of the tax credit. Last year was my best year in eight years, and this year is shaping up to be even better. Our first time homebuyers are getting pre-aaproved and are ready to move forward. If they can’t get a loan now, then they shouldn’t have been given a loan before! – Fortunately, our market is blessed with reponsible lenders who didn’t whitewash credit-worthiness to close deals! The next rung up on the ladder knows that there WILL be buyers for their homes, so now THEY are actively shopping for move-ups. This president has taken a bull by the horns and got something DONE…and it’s SOOOO nice for a change! Thank you Congress for taking appropriate ACTION. You have literally gotten people moving in the Berkshire market.

  22. Anne Thomas

    The banks seem to be less cooperative when doing short sales. ALL are coming back wanting notes since 4/1— 7 short sale approvals in progress. My loan modifier says they are less coperative, as well, for her.
    I think it was a waste of our tax payer money. It’s not helping the homeowners. The banks were doing much more before the bailout/stimulous. I also think they are tightening their belts so that the goverment doesnt nationalize them. I think they are tyring to keep their profits from going down the tube.

  23. Karen Wolf

    The Stimulus Package is not working, in my opinion. The only person it is benefiting is the first time Homebuyers where it should have been across the board. The first time Homebuyer is the one who is the most risky should they loose their jobs, etc and that would only add to the problems that we have already experienced with the bad loans. The upper end of the Real Estate market is not moving as there is no incentive for Buyers and there is no confidence in what the governement is doing. This is just another way for Obama to incentivize one segment of the market by discriminating against the others. He just does not get what makes this country work and grow.

  24. Elise Placido

    Shelter like food is a necessity and there will always be business…
    The cause of our woes is government involvement and the unintended consequences that insue.
    Fair Tax.org…starve the government and keep control in the hands of the private sector…
    The more passive we become the less liberty we have and the stronger the government gets….

  25. jay lloyd

    The FAIR TAX,and term limits is the answer. Take the power away from the politicians and give it back to the individual. Why is the tax code 10,000 pages long? I’ll tell you why because it is morally, and ethically bankrupt. Written for every special interest in DC to feather their nests. Jay

  26. Karen

    I think the tax credit would have had more impact on sales for first time buyers had they been able to apply this to purchase a home for down payment of 3.5 % at the closing. If they could get the money at that time. They could sign something with mortgage package that shows they received this and it would have given the boost to economy we needed, many first time buyers though able to make payments each month since some paying more now in rent just can’t save the money up front due to paying back school loans, already having to put earnest money down, paying the rent and monthly bills they are already paying… I remember when I was in 20’s and 30’s it was paycheck to paycheck but I still paid my bills and when I got a home I paid my mortgage. Getting the money the next year is great but probably won’t go toward the house and that is really where we need it. Also banks are still not giving loans like they should.Appraisers are overcompensating for what they did a few years ago and now won’t appraise places high enough. They want to use foreclosed prices and short sale prices that should not come into the picture when comparing to a newer or well maintained property. So finally when you have a buyer you still can’t get a property sold. What gives?

  27. Patsy Dodgson

    Too bad so many Realtors voted for Obama and democrats.

  28. Carol Anderson

    I know that the Stimulus packageis working in my market. Sure it would have been great if it could have happened at the closing table but it because of the Repulicans that does not want Obama and Company to succeed. I voted for him and will vote for Obama again.

  29. Interesting posts–the media has done a very successful job of terrifying everyone about the terrible real estate market since the beginning of the lending mess. The market is such a localized thing, but the news media posts headlines regarding markets such as Las Vegas, Phoenix, etc, as if that is the market everywhere. They can take what could be a positive piece of news and put a negative spin on it. There are many markets that did not experience the overinflation of prices that other areas did. But, after reading and hearing on a continual basis that real estate was in a crises they have accomplished a self fulfilling profecy. Tell everyone everything is bad long enough they’ll all start to believe it.Looks like they now do !Regarding the Stimulus– 1st time home buyers are but only a small % of our market–they need $ now to do a deal. They especially are the ones who need $ not tax breaks. The $ 8000 credit at closing could very possibly have brought more of them to the market and closing table. But what about investors? Why not a Tax credit for them? Do we not have a glut of inventory on the market that needs to be sold? If we could get inventory back into a semblance of a normal market–would that not stimulate our market ! Positive reporting coupled with incentives to get properties SOLD would not only benefit the Real Estate business, but all related fields (which of course spills over into all economic areas).It never appears our politicians actually get out in the trenches and talk to the people on the front lines of our industry for input. Some positive reporting–some incentives to MOVE this inventory off the market can get us out of this market. It is also up to the real estate community to commit to getting the word out to all that there are incredible opportunities out there right now, and to get the unmotivtaed sellers with overpriced listings to kick back and wait to sell until this market stabilizes. WE CAN control that part of the market!

  30. VML

    Incentives should have been FOR ALL HOME BUYERS. This would have jump started home buying and given the entire economy a real boost!
    1st time home buyers won’t do it in our market.

  31. Mara Beresford

    So, here we go again! Another
    adjustment to the market. I have
    seen three depressed times like what it looks like now.
    The same solutions appear, e.g. Fannie & Freddie and all the mortgage insurances will be giving out “new” re-written
    fixed rates and 30 years so they can once again sell them to each other “secondary mortgage markets”
    we’ll all work a little harder, cinch our belts, see
    this as a “great opportunity”
    to purchase REAl ESTATE that can be rented for most of the mortgage and when things turn around, those who see this as an opportunity and are brave enough to take this ” HP-Calculator calculated risk” may or will enjoy wealth. Mara

ADD YOUR COMMENT