Dear President Obama, My friends and I are wondering how the Stimulus Act and Housing Bill will affect us.

When I look at the Stimulus Act, I ask myself, “What does it do for the middle and upper middle class?

The tax credit for homebuyers has been taken out, unless you are a first time homebuyer. If I ask any realtor, “What market is moving?” They would say, the first time homebuyer market, especially with the benefits that FHA can offer. Help me understand this correctly, we are giving a credit to a group of people to purchase property that is already selling. Is this to stimulate more sales? I know realtors who are doing more business in this market then ever, so I don’t think that is the reason. This must have been a miscommunication to the President.

When I spoke with realtors about the $15,000 tax credit towards buying a house this year, they started up their engines. This tax credit was supposed to be offered to anyone who bought a home, but it was slashed out of the bill.

The next piece of news is the raising of Conforming and FHA loan limits back up to where they were last year. This was put back into the bill.  Has it happened yet? No. When do I think it will happen?  Some time in April.  How are the lenders reacting to this fine news? I have heard several lenders state, “We will take our time to put this into effect and we will not price these loans aggressively.” This is another example of something good that may not turn into something good.  I do know that this will help low down payment buyers in the FHA world get into a new home in some of the higher priced neighborhoods or condominiums, provided the pricing is any good.

The Stimulus Act is helping to build roads next year. I’m not sure what that does for California. The Stimulus Act gives money to states to help pay for law enforcement. I like that, more police is always a good thing, especially during economic uncertainty. The Stimulus Act will help send kids to college, provided you don’t make too much money to qualify for that program. I hope that helps, but it looks like those of you who are already sending your kids to college will not qualify for this program. Part of the Stimulus Act helps the unions. I don’t see how that will affect us, except by protecting some jobs in the entertainment industry and those well needed jobs in the American Auto industry. Those unions got it right.

If you read through the entire Stimulus Act, it really is a “Thank You” from President Obama to all the people who helped him get elected. It’s like giving Hilary Clinton the Secretary of State position.

Now that the Non-Stimulus, thank you for getting me elected, Act is behind us, let’s get down to business on the Housing Recovery Bill. There has to be some juice in there to get the real estate market moving and off to recovery. I have good news for well qualified, responsible homeowners who paid there bills on time but are now upside down in your mortgage. I think we are going to be able to refinance you if you put 20% down on the purchase of your home and now you are underwater, meaning that you owe more then your house is worth. This happens to me every time I lease a car. We can refinance you without an appraisal, at a great interest rate, not to be lower then 5.125% and you cannot be underwater more then 105%.

Let’s do the math, shall we. I bought a home for $100,000 (unrealistic in California but maybe, not for much longer). I put down 20%, $20,000, I owe $80,000 and I have been responsible about paying my mortgage on time. I can refinance, provided my value has not dropped more then 25% from when I bought it. The Case Schiller index shows that the average home price drop in the United States is about 35-40% nationwide. President Obama, I think you missed the mark again. On top of that, if I can rent a house in my neighborhood, for the same price as what I am paying for the mortgage that I have no equity in, why stay? Didn’t you payoff or take over debt for all the banks and some insurance companies? I guess paying down our mortgages so we have some equity and want to stay in our homes, is only on the table for mismanaged companies, not for responsible homeowners. Also, this program is only for conforming loans. How does that help the middle or upper middle class homeowner when they owe more than the conforming loan limit? What happens when the middle or upper middle class homeowners start to give their houses back and we have no money available to purchase these homes? We could, in essence, have a free fall in the Jumbo market. If we have learned from our past mistakes, why are we not making changes to prevent it?  Fortunately, at Samuel Scott, we have some options for Jumbo purchases and refinances to help people stay in their homes because there are many great deals out there.
I also believe that the administration has some very smart people involved and will react quickly and swiftly not to have a freefall effect. I think and believe, if you are sitting on the sidelines, thinking of refinancing or even buying, your window is going to shrink. One thing I have learned from being in the business, for 17 years now, is what goes up always goes down and what goes down always goes up. Over 30 years ago, you could buy a home in Brentwood, Fairbanks or Del Mar for $80,000. What price are you going to pay today? Thirty years ago, we have gone through at least two recessions and one terrorist attack on our soil. I would say that,” that was a good return on investment.”

Remember, now is the time to take advantage of the market, it is not the top. Do not try to time the lowest rate or the lowest price. Trust me, you will lose and then you will say, “Todd you were right, I should have listened!”
Mark and I are available 7 days a week, until 11pm every night on our cell phones. Call us so we can get you off the fence, to either refinance or purchase your home. A wind of change is coming. Today we have options in lenders and appraisers but tomorrow, those same options may not be available. I look forward to hearing from you. Next week I will write about how we used to have competition in the mortgage world and now we don’t. Do you think that is a good thing? Boy, do I have a lot to say.

Call us 858-259-6070 office, my cell is 858-775-8958 and Mark Robertson cell is 858-401-9353