Some Government Intervention That Effected the Real Estate Market
December 30, 2009
The week between Christmas and New Year's Day is often the week of reflecting on the year just ending. 2009 was certainly the "Year that Was". Here are a few of some government actions that certainly had an impact on the sale of real estate.
1. The $10,000 tax credit for California homebuyers of new construction. The total amount allocated for this benefit was quickly used, but it does seem that it did succeed in reducing the standing inventory of newly constructed homes. The bill set aside $100 million dollars for this program.
2. The $8,000 first time homebuyer's tax credit enacted by the federal government. Since most of the homes that were sold locally were to first time home buyers, it can be judged that this credit along with the very affordable prices and historically low interest rates was a great incentive for buyers.
3. On a less positive note, the establishment of the Home Valuation Code of Conduct was a source of major controversy and confusion among lenders, real estate agents, buyers and sellers. The government, in an attempt to correct the inappropriate appraisals that were a part of the housing bubble, decided that lenders and agents influenced appraisers. Therefore, neither lenders nor agents were to have any direct contact with appraisers. A central clearing house was used to assign an appraiser to a transaction. Unfortunately, appraisers were selected that were out of the area and in some cases were unfamiliar with the neighborhoods to which they were assigned. As of today, efforts are being made to correct this HVCC.
4. This perhaps is not truly a government decree, but lenders and their underwriters developed a "desk review" system for appraisals. Thus, a person who had never seen the property had the authority to change a field appraisal if that person looked at the comparables that were used and decided that they were inappropriate and that the actual market value of the property was less. The effect of these processes outlined in items 3 and 4 was the elimination of market forces in the setting of property values. Maybe in light of the excesses of 2005-2007, such oversight was necessary, but it created much confusion about the point at which a buyer or seller could know that a transaction could be completed.
2009 was a year of climbing out of a hole and some of the actions were forward moving and some seemed like barriers.
The week between Christmas and New Year's Day is often the week of reflecting on the year just ending. 2009 was certainly the "Year that Was". Here are a few of some government actions that certainly had an impact on the sale of real estate.
1. The $10,000 tax credit for California homebuyers of new construction. The total amount allocated for this benefit was quickly used, but it does seem that it did succeed in reducing the standing inventory of newly constructed homes. The bill set aside $100 million dollars for this program.
2. The $8,000 first time homebuyer's tax credit enacted by the federal government. Since most of the homes that were sold locally were to first time home buyers, it can be judged that this credit along with the very affordable prices and historically low interest rates was a great incentive for buyers.
3. On a less positive note, the establishment of the Home Valuation Code of Conduct was a source of major controversy and confusion among lenders, real estate agents, buyers and sellers. The government, in an attempt to correct the inappropriate appraisals that were a part of the housing bubble, decided that lenders and agents influenced appraisers. Therefore, neither lenders nor agents were to have any direct contact with appraisers. A central clearing house was used to assign an appraiser to a transaction. Unfortunately, appraisers were selected that were out of the area and in some cases were unfamiliar with the neighborhoods to which they were assigned. As of today, efforts are being made to correct this HVCC.
4. This perhaps is not truly a government decree, but lenders and their underwriters developed a "desk review" system for appraisals. Thus, a person who had never seen the property had the authority to change a field appraisal if that person looked at the comparables that were used and decided that they were inappropriate and that the actual market value of the property was less. The effect of these processes outlined in items 3 and 4 was the elimination of market forces in the setting of property values. Maybe in light of the excesses of 2005-2007, such oversight was necessary, but it created much confusion about the point at which a buyer or seller could know that a transaction could be completed.
2009 was a year of climbing out of a hole and some of the actions were forward moving and some seemed like barriers.
posted by shirley harry at 8:45 AM
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