Post by Bozur on Nov 7, 2008 22:35:39 GMT -5
Realtors Push for Federal Aid To Homebuyers
By Stephen Gandel Friday, Nov. 07, 2008
The National Association of Realtors is lobbying for the government to artificially lower mortgage rates by purchasing loan points for homebuyers. They say the program would cost $100 billion, and could raise home prices by as much as 4% nationwide. Anyone buying a house for primary residence would be eligible for the mortgage-rate buydown, which would lower a purchaser's loan rate by 1% for the life of the loan. They say the incentive should be made available for the next 12 months."The sentiment in Washington is that we need to get the housing market moving to get the economy back on track," says Lawrence Yun, chief economist of the NAR. "We need to strike while the iron is hot."
But some housing market economists question the wisdom of the move. They say helping people who may buy houses in the future is not where the government should be providing assistance. "I can't imagine why you would want to do this," says Dean Baker, co-founder of the Center for Economic and Policy Research, a Washington think tank. "What you should be doing is helping homeowners who are already over their head."
The proposal was detailed on Friday at the NAR's national conference in Orlando. The real estate association is asking the 20,000 members who are attending the conference to sign letters to Congress showing support for the initiative. It is part of a number of moves NAR is advocating to help boost housing prices.
NAR president Charles McMillan says his organization has "shared the proposal with members of Congress in recent days," but doesn't know whether enough law makers would support it. "We don't have a read on that yet," says MacMillan.
Home buyers have long been able to purchase so-called loan points, which can lower the interest rate they have to pay on their mortgage. Generally, it costs 1% of the total amount of the loan to lower a mortgage rate by a quarter of a percent. That means on a $200,000 loan, a home buyer would have to pay $8,000 to lower their mortgage rate to 5.5%, from the current rate on a 30-year mortgage of about 6.5%.
The NAR's proposal calls for the government to pay that upfront fee to lower the mortgage rate, instead of the home buyer. Yun says lowering mortgage rates by 1% would result in up to 840,000 additional home sales nationwide, reduce the inventory of homes on the market by 20%, and boost housing prices. "It would be a significant inducement for buyers to enter the market," says Yun. "We could stabilize the housing market and as a result Wall Street and the US economy in general."
The real estate brokers association also says it still supports extending the $7,500 tax credit for first-time home buyers to all buyers, and to make the tax credit permanent. Right now, home buyers have to pay back the credit when they sell the house.
www.time.com/