Stimulus Bill Affects?

So if you haven't heard, the $787 billion dollar federal stimulus bill is set to be signed into law tomorrow by President Obama. If you are not sure what exactly is being passed, don't worry, you are not alone.  I try to keep my nose out of the politics as much as possible and besides, who in their right mind has time to read through a 1071 page bill (apparently not even those who voted on it). 

The question remains though, what affect will this stimulus bill have on the housing industry? There was much speculation that the bill would perhaps include home buyer tax credits up to $15,000 or $22,000 and that somehow mortgage rates would be uniformly dropped to 2.99-4.00%.  

However, it appears in actuality, when the bill is finally signed into law, it will be more about preserving what we already had as opposed to providing monumental change for buyers, lenders and the industry.

Charles McMillan, President of the National Association of Realtors sent out the following letter to NAR members yesterday summarizing the important details of the bill in regards to the real estate market. 

Here's our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulus package AND the Treasury's package holistically, in compliment with each other - mostly because that's how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.

So here's what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES's thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

In addition, we preserved what we have - which some tend to forget is always on the table when these negotiations start up again - mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

We did make a run at the $15,000 credit -- and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of 'what we are willing to give up to get a $15,000 tax credit' and kept the debate again, on how much it should be. It's pretty hard to complain when they give you what you ask for and you lose something you never had.

More than anything, what the signage of this bill will do is end the speculation.  Many home buyers were/are in a holding pattern waiting to see what would be passed.  Now that we know, its time to take action.  2009 will present a tremendous buying opportunity for those who are motivated, intelligent and decisive.  The buyer's tax credit (up to $8000 now) and removal of the repayment clause are great incentives for first time buyers. 

What does this mean for you personally?  Give me a call or shoot me an email and lets discuss your specific situation and determine your best course of action.