Feb
22
Stimulus Package - Thoughts From A Skeptical Realtor…
Posted by Joshua Hanoud under For Buyers, For Sellers, For Realty Professionals, General Information, Debate, Bailout, President, Ask a REALTOR
The following question was recently posed by the Realtor.com blogging team…
“How will the stimulus package affect the Real Estate market, and the economy as a whole?“
In my opinion, the stimulus package will only serve to delay the inevitable and prolong the pain. There is a basic concept that is being grossly ignored and it is as strong as the law of gravity.
Supply vs. Demand.
There are simply too many homes priced too high to spur interest from the pool of ready, willing, and able buyers. The only thing that will fix this economy is time. It took several years of fantastic appreciation to get to the point where the decline began - and the appreciation was astoundingly quick and strong. Life is about balance - in all things. Including real estate. Just as we have had several strong years of appreciation, so must we now have several strong years of depreciation. This is not a surprise, folks. Real estate is cyclical and always has been. It goes up, then down, then up, then down. We just had such a strong “up-swing” that the down-slide is significantly more potent and is affecting many other facets of our lives as well.
The $8,000 tax credit to those who purchase a home is a nice benefit…but I don’t think it’s going to spur anyone to buy a home who wasn’t already planning on doing so in the near future anyway.
I’m scared out of my mind that it will help to spur more new construction. I hope my builder friends don’t get upset, but the last thing we need to turn this market around is more inventory for sale.
The stimulous plan is a struggle to fight the laws of nature. It goes against the natural balance and order of Supply vs. Demand economics and it’s trying to force an outcome that isn’t supported by my metaphorical gravity. Again - it will not turn this market around - it will only prolong the journey and hurt more people than it helps.
I still maintain that the best way for this market to turn around is for us to speed up the process, not slow it down. The faster home prices drop, the more properties will be purchased by first-time homeowners and investors, and the more the inventory levels will shrink. As inventory levels will shrink, relative demand will increase and prices will stabilize and over time increase as well.
Sticking a band-aid on a broken leg will not help it to heal. It needs time.
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COMMENTS (2)
Who it helps is poor folk. Everyone deserves a home and with the new 2009 Tax incentive, hopefully the poor folk will be encouraged to try and find one too. It would be nice if more realty agents would think in terms of buyer needs as much as realty fees they receive. April 2, 2009 at 2:40 pm
Hi Lynn - thanks very much for the comment! I agree with you 100% that everyone deserves a home; however, not everyone should be buying houses. Especially if it's not within their means. That only leads to heartache and inevitable foreclosure. I would submit to you, that if you are unable to afford a home without the $8,000 tax incentive, then you are stretching too tight to afford it WITH the $8,000 tax incentive and putting yourself in a very (financially) dangerous position. The tax incentive is great for people who are already planning on making a purchase. But keep in mind...the tax incentive is the gravy - not the meat. What it comes down to, I think, is this...people who are currently unable to afford to purchase a house, are still able to rent a house, or rent an apartment, or somehow keep a roof over their head - and absolutely nobody should have to be out in the cold unless it's of their choosing. But if you are currently unable to purchase a house, then you absolutely should NOT be trying to purchase a house. (and I would say that statement reflects the ethic of putting the buyer needs ahead of the realty fees, no?) April 2, 2009 at 6:31 pm