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The Latest Economic Stimulus Package

Mitch McConnell, United States Senator from Kentucky, today suggested that the latest package to help the economy should have a provision for a 4% mortgage interest rate.  From our position, would this help the housing market?

I can only speak for the real estate market here in Cincinnati, Ohio.  From my perspective, the lower interest rates only help potential owner occupier buyers and those who already have a mortgage that is less than the value of their home.  If you owe more money than your house is worth, or if you already owe so much trying to stay afloat, you cannot refinance no matter the interest rate.

So who is this supposed to help again?...It helps people who are already status quo.  It helps mortgage lenders and realtors make a little more income and it will help to slightly reduce the current inventory. It doesn't help anyone who is on the edge and it doesn't help real estate investors who would buy up the property that needs work.

So if we want to marginally reduce the current real estate inventory and marginally improve the median sale price, IT WORKS! However, if we want to prevent people going into foreclosure and if we want to dramatically reduce the real estate inventory,  IT DOESN'T WORK!

What would really help?...It would really help if Fannie Mae and Freddie Mac would increase the number of fixed loans that investors can own and Fannie Mae could require a larger down payment to protect themselves. This would allow investors the security to buy residential investment property for rental.  Right now investors can only buy 4 properties on a fixed rate mortgage.  After that, they have to use commercial notes which are not fixed and therefore much riskier.  Also, if they already own more than 4 properties on Fannie Mae loans, they cannot refinance them.  So we could convert investment property from risky non-fixed rate loans and make sure that we don't have investors going into foreclosure.

Right now a large proportion of homes on the market are foreclosures or short sales and these homes are often not in the kind of condition that makes them attractive for owner-occupier buyers, but they are perfect for investors. These properties would be bought up, the inventory would be reduced dramatically, the median sale price would go up, and that would allow owners who are on the edge to be able to refinance their homes on the low rates that we already have, which would in turn help keep those owners out of foreclosure.

The secondary value of this is that when the median sale price goes up, people see real estate as a good investment and other owners will take advantage of this market to trade up or down.  THIS WOULD WORK for all owners.  It would help investors buy up inventory.  It would help prevent investors from going into foreclosure.  It would improve consumer confidence.  It would encourage home owners to improve their homes which would stimulate other parts of the economy and would stimulate the real estate market in general. THIS WOULD BE A WIN WIN FOR EVERYONE!

If you agree tell your congressman, your senators, your president, and the media! 

Barack Obama, President of the United States

Sherrod Brown, United States Senator (D - OH)
455 Russell Senate Office Building
(202) 224-2315

George Voinovich, United States Senator (R - OH)
524 Hart Senate Office Building
Washington DC 20510
(202) 224-3353

Follow this link for contact information of the 18 Ohio Congress Representatives.

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Carol Meadows, 513.766.3878.  Or email The Carol Meadows Team with any questions.

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