Earlier this month, I traveled to Washington to cover a rally. Now, you ask, why would I travel from my home in Orange County, N.Y. more than 250 miles to cover a rally? There have to be hundreds and maybe even thousands of rallies staged in the nation's capital each year that try to bring media attention to a cause or hot-button issue.
However, this was not your typical rally. This was a first-of-its-kind rally staged by the National Association of Realtors (NAR), geared at telling Congress that the real estate markets need help and that calls to limit or do away with the mortgage interest deduction would be disastrous to the still-troubled housing market.
About 15,000 Realtors from across the country dressed in blue t-shirts assembled near the base of the Washington Monument on May 17 to participate in NAR’s "Rally to Protect the American Dream."
Realtor Rally
Protest in Washington drew a big crowd.
Speaker after speaker at the event described the real estate recovery now under way as fragile. Talking with local Realtors in the northern suburbs of New York City, they tell me that ample, available for sale inventories, combined with historic low interest rates, have spiked buyer interest. In some markets, home sales are on the rise, while in others it is still difficult to convince the growing number of "tire kickers" to make a buying decision.
However, after five years of a declining home sales market, Realtors are thankful that the "American Dream" is making somewhat of a mild comeback.
Home sales are on the rise and although the latest Pending Home Sales Index released by NAR showed a 5.5% drop in buyer activity, the index still stood at 95.5, more than 14 percent higher than a year ago.
Lawrence Yun, NAR chief economist, stated that despite the dip in the index after three consecutive monthly gains, "The housing recovery momentum continues." He reported that NAR expects housing market activity to produce the best results since 2007. NAR has, in fact, upgraded its housing forecast with existing sales now projected to reach 4.66 million in 2012 and 4.92 million in 2013, up from 4.26 million in 2011.
Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami, told the crowd assembled at the rally:
Realtors know that homeownership is an investment in our collective futures, and we're here today to protect the American Dream of homeownership. Homeownership and investment in real estate impacts families, communities, small businesses, and the nation's economy in a very meaningful way. Today, we're proud to be showing the country that homeownership matters.
Realtors believe that proposals in Congress to raise funds to help reduce the federal budget deficit by limiting or doing away with the mortgage interest deduction would derail the home sales recovery now underway.
NAR is also calling for banks to loosen the reins on what they term are very tight lending requirements on prospective purchasers. In fact, the national Realtor organization notes that if lending returned to what it termed were more normal standards, the 2013 sales outlook for existing-home sales would rise from a little over 4.9 million to 5.3 million.
Katheryn DeClerck, an associate broker with Better Homes & Gardens Real Estate Rand Realty in Warwick, N.Y., who attended the NAR rally, told me:
I don't recall the real estate industry being under such attack as it has been in recent years. Taking a stand for homeownership is critically important. I don't believe that the economy of this country is going to turn around without the real estate industry being a part or leading the way.
The NAR rally was staged during the organization's Mid-Year Legislative Meetings. In addition to its stand on the mortgage interest deduction and greater access to capital for homebuyers, NAR is also recommending reform of Government Sponsored Entities Fannie Mae and Freddie Mac. Specifically, NAR suggests Fannie and Freddie be converted into government-chartered, non-shareholder owned authorities that are subject to tighter regulations on product, revenue generation and usage, and retained portfolio practices that ensures they accomplish their mission and protect the taxpayer.
Other legislative priorities being advanced by NAR include approval of a multi-year National Flood Insurance Program. The House recently passed a five-year bill, but the Senate has yet to approve a multi-year plan. NAR is also continuing to work with Congress to get legislation passed to make the short-sales process more efficient.
In terms of commercial real estate, NAR is lobbying Congress and the federal government to consider legislation and regulation aimed at improving commercial real estate markets that would include: accelerated depreciation, increasing the cap on credit union member business lending, additional banking agency guidance related to term extensions, creation of a mortgage insurance program for performing commercial loans, improved credit availability for small businesses, and creation of a US-covered bond market.
So, as the rally wound down and Realtors dispersed along Constitution Avenue, I realized that while the rally may have helped focus attention on the American Dream of homeownership for a few hours, there continues to be many issues facing consumers today that could possibly deter them from putting money down on a down payment.
For example, talk of tinkering with the Mortgage Interest Deduction has prompted a number of fellow homeowners to tell me that they would simply hand the keys to their home back to their lender if the MID was no longer available. Then there are continuing falling home values, tight lending standards, high gas prices, a still unstable job environment, and a presidential election that pits two very differing economic philosophies.
In other words, all these factors breed uncertainty, which if allowed to take root will undermine any real housing recovery. We are now in the prime selling season for the year. Home sales in the next few months will determine whether this recovery can be sustained.
I have noticed in my area that not so many homes are on the market currently, I wonder if this is a reflection of them not being stuck on the market as long.
Just a guess, but I bet it's a result of lower inventories because more people (who have the option) are waiting to sell rather than trying to fight the market.
Is the house price at the 2006 peak something like the nasdaq at year 2000. More than a decade past nasdaq is still around 50% from its all time high. My guess is it will take a equally long time for home owner to see 2006 peak price.
I agree. There are fundamental issues that need to be worked though and this will not happen quickly. I think there is still an inventory that was purchased by people who just really couldn't afford them that needs to be soaked up before we can see any real growth.
"equities are falling, house prices are falling, commodity prices are falling, just wondering where will people invest all the money ?"
@Yaland，Unless you are retired and a net seller, the falling price shall be a good news, you can scoop more assets with less price. Of course you need to choose wisely about which asset to invest.
Unless you are retired and a net seller, the falling price shall be a good news, you can scoop more assets with less price.
@Value Hiker, I agree with your point. But what about people who have extra cash to invest ? Where can they invest their extra cash ? Is it the right time to invest in housing or prices will still correct further ?
First, unless you are 100% in cash, it is emotionally hard for investor to jump in the market while seeing his portfolio is shrinking. But as long as you have extra cash to invest in a down market, you must cheer up and take bold move.
Secondly, investors have strong desire to buy the stock at exact bottom, and sell at the exact peak. The problem is: it is a mission impossible. If you know the intrinsic value of an asset (house, stock, commodity...),and you have enough of margin of safety based on current market price, you shall go ahead. Yes, the price can fall further, and most likely it will, but it doesn't mean your committed purchase is wrong: never judge your investment decision purely based on market fluctuation.
Thirdly, there is no right time, only right price,for market. You know how frutile it is to time the market.
I maintain that the only thing to do is save money and dollar-cost average in .. and ignore the volatility.
Given the pattern of the last two years, I would not be surprised to be a vicious drop into the August/Sept timeframe before there is some relief.
Therefore I will be putting to money in 3-4 chunks: Next month, September, October. For whatever reason Sept./Oct. often market low points in the markets.
Totally agree, Scott. It will be the worst nightmare for an investor who has no cash reserve while the whole equity market is on a fire sale. I knew it because it happened to me years ago.
How sad is it that stashing something under a mattress only seems questionable from the standpoint of robbery or fire loss? From an investment standpoint, it offers about as much as the bank.
@cat tail, nowadays, bank may be funcationally worse than a mattress: When a mattress does not work, we can toss it over to the dumpster. When a bank doesn't work, we need to cough up more tax money so the bank can pay its TALENT executives a fat annual bonus.
There are several homes that have been on the market for at least a year. I thought that the market was taking an upswing, but it looks like things are still a little tough for those in this industry.
Job creation numbers and unemployment are perennial hot-button indicators during an election year, but I hope that housing prices and the lack of mortgage liquidity will come to be big factors, too for the middle class and above.
Obama has done NOTHING of substance to help people who are underwater with renegotiation and refinancing of their loans. The banks are too big to fail but the citizens who borrow from them are apparently too small to succeed--in receiving any attention or mitigation. That cloud continues over the economy just as much as unemployment.
Since I live in a bright blue state, I've given up the idea that my vote actually counts, but I hope those in truly depressed housing markets can find a way to make it an issue in the 2012 campaign.
I own a house and I am fortunate that I did not lose money on it, but if I did not own a house now and I were looking, my motivation to buy a house would be purely to save money. It's now cheaper than renting.
If you buy a house now with interest rates this low it's nearly impossible to lose. You can finance with a 7-year ARM at 2%. That's means to borrow $200,000 it costs about $1,000 a month. And then you can write of the interest at tax time.
I understand that many people cannot buy because they don't have the down payment or can't get a loan, but prices and interest rates are not the barrier -- it's financing availability. The costs are completely reasonable.
You know, one of the best potential real estate investments could be multi-family in college towns. We've aleady discussed the high costs of education, and student housing is a big chunk of that expense. Of course, you have to have the stomach to rent to potentially rowdy kids. But if you protect yourself enough with a hefty security deposit and really good property insurance, the return on investment could be very nice.
Student housing is intriguing. You could also invest in something like American Campus Communities (ACC), a niche player renting on- and off-campus student housing.
Multifamily is booming -- it really does offer a lot of upside potential. I think small single family homes that could be purchased at a reaonable cost and rented for fair amounts could be good, too, although I think the headaches of becoming a landlord depend largely on the property laws in the specific city or state.
Definitely a point. I would not mind owning a rental unit in some locations. But in NYC, for instance? Forget about it. It takes forever to evict a tenant, even one that is occupying a unit illegally and hasn't paid rent in months.
I've known many fair decent people who got into --- and quickly out of the landlord business in NYC, Regulations are crushing. Even those owners who want to do the right thing by tenants are often crippled by rules, fines,etc.
I have a friend who is a landlord in NYC and the picture she paints is a horror story. Basically, tenants know that landlords are hog tied by regulation so they pull all sorts of shenanigans...demanding rent rebates, bribes to actually vacate rent-controlled apartments, demanding upgrades, etc.
@minvestor, I don't think that nine years without paying rent could happen anywhere else on the planet than NYC. I personally don't think this will set a precedent at all--except for entitlement weirdness!
@Noreen, being a college-town slumlord has always been a life goal of mine. They tend to be the ones who show up at the bars (usually the ones they own) at 4pm in their wife-beaters, drink until about 8 or so when the college kids start to come in, then they skulk to some corner with a cigar to spectate. My kind of life! And great money too. Generally charge exhorbitant rates for properties that fall apart a little bit more every year, because college towns are run by landlords so there's no political push to enforce codes or care for properties lived in by college kids. That = $$$$$$$$$$$$$$$$$$$$$$!
You could be the exception Broadway - the property owner who provided safe, decent housing for students and collected fair rent on your investment. You don't have to be a stereotype to profit from student housing.
Not all student housing is falling apart. There's been a big push on many campuses in recent years for higher quality housing. Students expect it and parents demand it.
I'd be interested to see the demographic breakdown of who's buying/renting the luxury "college" properties. I'd venture to guess that it would be disproportionately foreign students living there on their parents' dime. As for the sub-luxury housing, I think it many cases the typical American student wants to live that typical American college life --- living in a crapper with 10 of their best friends, having their parents pay way too much, or if their parents don't pay, then having to work 3 jobs to pay for rent, books, pizza....
Indeed. I have several friends whose parents' purchase real-estate in college towns where they lived to help them with housing. In the end it turned out to be great investments for the parents, they are now landlords collecting large rents or they sold at a profit. College towns tend to have more stable economies and healthy real estate markets.
You're right Driven. People seem to expect someone else will pay at least as much as they need to pay off the mortgage and their other debt, fair market value be damned,
I can understand the fears and the optimism. In my area of the country I am seeing the best movement in the market I have seen in 4 years, houses are literally flying off the market, granted at very reduced prices fueled by very low interest rates.Do you think it's just pent up demand or do you think it will hold? Personally I see it as a spurt not a long term trend because the unemployment situation is still very precarious.
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