As I have posted before, I believe this will be a fairly phenomenal year with respect to the programs we will see implemented in order to stimulate the housing market. For better or worse it is a bit ironic that they will be implemented in an election year. We have already seen rumblings about them. Among them, and not limited to them I think they will include:
– A principal reduction program. This is not new and has already been in place. I believe we will see it ramp up.
– An investor incentive program for purchase of REO inventory for investment property. This could include a reduction in cap gains tax (cap gains from rental income for cash flowing properties?) as well as a shorter depreciation period (from the current one which is 27 years?)
– 100% financing offered by Fannie for new purchases (non recourse).
– Allowable Fannie refinancing for pretty much any and all properties at current market rates, (4.2%) REGARDLESS of what your property is worth and REGARDLESS of whether you are underwater or not. If you have a home worth 450k and you have a balance of 625k then you get a full 625k refi at current rates as long as you are current on your loan.
I think these factors in conjunction with rock bottom rates will produce a fairly robust market overall with variances in cities nationally but mostly to the upside. These measures will also serve to keep inventory low and stimulate buyers who were on the fence as well as tenants. Additionally it will serve to slow down rent increases.
From the business side this will also continue the process of the public taking on more risk and reducing privatized loss of institutions and large investors holding assets that are underwater. The underwater homeowner refinances, the underwater assets are paid off at the full loan balance, and the taxpayers… I mean the gse takes on another turd.
What will be interesting is that I believe that no legislation will be needed for any of this. If there is any legislation needed and it becomes problematic then there will be executive directives and appointments that will push this through and do it fast.
How does this affect San Diego RE? I believe it will affect it in a positive way. I do think FLU has a very valid point about white collar employment and I do agree that sdr has a valid point about the diversity of the economy. I think that there will be fairly significant downsizing over the next decade at plenty of places… SAIC, HUGHES, TITAN and plenty of others. The commercial sector is strong though… not strong enough to soak all of the people up but strong.
The main point is the realization that it all hinges on housing. Pure and simple. The election doesn’t hinge on 1000 engineers losing jobs but does hinge of 3000 other people getting work in the construction sector, finance sector, and lower level sectors that thrive when housing heats up.
So to me…. any thoughts of housing going down for anything except high end homes are incorrect. The opportunity came and went quite awhile back. Next opportunity for that will not be until we see interest rates run and that is not gonna happen for awhile. That can has been and will continue to be kicked down a long long road.
