Directors for the National Association Realtors on Monday formally signed off on a real estate stimulus proposal that includes a temporary $7,500 tax credit for all buyers, with no repayment requirement, and a temporary federal buy-down of mortgage rates to 4.5 percent or less. The tax credit, as proposed, is intended for all buyers — not just first-time buyers.The group’s plan also calls upon the federal government to make permanent the temporary increase in FHA, Fannie Mae and Freddie Mac loan limits to $729,750 in high-cost areas. The limits are scheduled to roll back to $625,000 on Jan. 1.
And the plan reiterates the association’s long-standing aim to permanently block banks from engaging in real estate brokerage and management.
Dale Stinton, NAR CEO, said that the group’s proposal would cost an estimated $100 billion per year and its temporary relief measures would run for two years.
Realogy Corp. floated the idea of government-financed interest-rate buy-downs in October, saying they could unleash pent-up consumer demand for housing (see story). Traditionally, sellers have used interest-rate buy-downs as an incentive, paying lenders extra points up front to obtain a reduced interest rate for a buyer, often for the first two or three years of a loan.
Stinton said NAR arrived at the 4.5 percent or lower interest-rate buy-down level for a 30-year fixed-rate mortgage as “a result of some surveys and focus groups and talking to some brokers around the country,” and that the group’s research indicates that a buy-down in interest rates to 3 percent to 4.5 percent would get the market rolling again.
“We think in a couple years things will come back to where they should be,” Stinton said. He said interest-rate buy-downs could be funded as a part of the $700 billion federal plan to bring liquidity back to the financial markets.
Under the proposal, the rate buy-downs would apply to the purchase of “all new and/or existing homes sold up to $1 million in price,” and “There are a number of ways in which the government ultimately could decide to structure and fund this program, which could be addressed as part of the stimulus packages currently being discussed in Washington.”
Stinton said, “It’s a small price to pay, in my opinion, to stop the hemorrhaging,” adding that a more prolonged market slump could prove far more costly.
He also said that past stimulus efforts fell short in getting “the demand side moving again.”
“We have to find a bottom to this market, from the real estate point of view and from an economic point of view,” he said.
Several directors proposed to amend the language in the four-point plan, though most amendments failed as NAR officials urged directors to adopt the given language as a starting point for federal lobbying efforts.
Although Congress is expected to consider passage of another stimulus bill when it returns for a “lame duck” session, some economists have recommended that it focus on government-funded infrastructure projects like roads and bridges that create jobs and stimulate spending (see story).
Also at the NAR board of directors meeting, association officials announced the approval of the charter for the group’s federal credit union launched by the group.
The group’s budget, approved at the meeting, anticipates that membership could drop to about 1.06 million in 2009, down from an earlier projection of about 1.08 million. The revised projection is also down from a peak membership of 1.36 million in 2006 and a level of 1.24 million as of Oct. 31, 2008.