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The senate yesterday approved a bill aimed at stimulating the housing market. According to the AP: "The plan contains $4 billion in grants to local governments to buy and refurbish foreclosed homes, new authority for states to issue bonds to be used to refinance subprime mortgages, and a temporary $7,000 tax credit for people buying new homes or properties in foreclosure."
So the Senate decided that local governments should get $4 billion to get into the real estate "flipping" market. They will buy these homes, fix them up and then re-sell for a profit? Is that the business government is supposed to be in?
Most local governments have problems fixing potholes and keeping streetlights working, and our wise senators believe that they will solve the housing crisis?
The real problem right now with foreclosed homes is that the banks refuse to bite the bullet and sell these homes for lower prices. I have spoken with a few people in the real estate market trying to buy foreclosures and they all said that the banks aren't prepared to take a loss. So now here comes the senate and says let's give $4 billion to local governments and they will overpay the banks for these properties. Great, so in an election year the US Senate has basically screwed prospective home buyers, choosing instead to bailout the banks.
What a surprise.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 4/3/08
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Reader Comments (Page 1 of 1)
4-03-2008 @ 10:50AM
John said...
Shocking. I actually agree. Housing prices need to go way down. When you sell a $400,000 house to somebody making $50,000, that means it was never a $400,000 house. And probably none of the houses next to it were $400,000 houses.
4-03-2008 @ 12:06PM
Americas Watchdog said...
We have the National Mortgage Complaint Center & not only is this US Senate housing package a joke, but it wastes more "taxpayer" money on something that you cannot fix with a wink and a kiss. As we have been saying since 2005, this will become a 2 trillion dollar disaster.
We expect 2 million foreclosures in 2008 and at least as many in 2009. Today 1 in 7 US homeowners owes more on their home than it is worth. By 2009 it will be 1 in 5.
Meaningful change on the part of the US Senate or House has to include changing disclosure rules for banks, so that for the first time ever US Homeowners can see what the bank is actually making on the mortgage. We estimate that 50 million US homeowners pay a higher monthy mortgage payment than they could have received because a bank or mortgage banker was not required to disclose something called a "yield spread premium". Mortgage brokers must disclose these kick backs for inflating a borrowers interest rate (even though they do a poor at best job of doing so). Banks have no such requirement, even though they get this kick back too.
This mentions nothing of cities in the real estate business. How stupid is that? Cities will simply blow the money on something else & go back to the Senate/House & ask for more.
We really do have the best government money can buy. Pretty sad stuff.
4-03-2008 @ 2:11PM
william lindblad said...
What did the public expect? It's and election year and the political front is going to propose SOMETHING, and quickly. This is a piece of pure political action and I doubt that it will ever get to the white house. If it does I doubt that this kind of thinking is on Bushy's track. As described in article I would give this 100% VETO. This snowball is already rolled downhill to a size that will prove to large to stop - even with government intervention. They are grasping at straws and it is an "any action is better than no action" effort. Recession is a term that can only be applied after the fact and since we are already there, it's only a matter of time to make it official. We have a DIM (depression in making) and that is next in line.
4-03-2008 @ 2:42PM
John said...
Recession?
How? We had low taxes and little regulation. Ain't that all it takes to make a great economy?