Category: Stimulus Plan

The other day, I mentioned my astonishment at the Housing Affordability and Stimulus Plan and how it really leaves California (the most troubled housing markets in the country) out in the cold.istock_000001823153xsmall

Then the announcement came regarding an $8,000 tax credit.  Forgive me, but whoop-dee-do.

While this may be meaningful in the lower price points, we aren’t having trouble there these days.  Market time in the under 500,000 range is running around 4 months, and 30 days if it’s not a short sale.  Clearly, that is a strong seller’s market.

Where do we need help?  The higher price points are hit hard by tight financing, consumer confidence, and high inventory.  And frankly, in those price points, the value of a home could potential fall $8,000 while you are in escrow.  Not to mention, first time buyers that qualify for the tax credit, aren’t generally buying in that price point – so I guess that doesn’t excite me much.

Most recently, plans were announced to cut mortgage deductions for those in the higher income tax bracket.   Now, if you live in Orange County and you are making $208,850 or more, you are living a lifestyle that is a far cry from someone living in the Midwest on the same income.


You may have purchased a home in 2006 that you are affording (barely because your bonus didn’t come through this year), and you may have lost 30% of the value since you purchased.  Since you are considered part of the ‘wealthy’ in the country, you are now on the verge of loosing some of your mortgage deduction.  You know – the mortgage you’ve been trying to hang onto, even though you owe more than the house is worth….

I’m waiting for the part of this plan that impacts California.  Maybe I wasn’t clear last time I mentioned this – one that impacts California in a positive way.

The Homeowner Affordability and Stability Plan was recently released.  It attempts to address some of the issues that the current housing market is struggling with and I have been through some of the details and as it currently is written, I’m disappointed.

Near the end of December last year I posted the article about about the top 10 worst housing markets in the country, according to CNN.  Unfortunately, 8 out of 10 were in the state of California.  Now keep in mind, California is a massive factor in our national economy.  Our Gross Domestic Product is larger than all but 8 countries in the world.   You will not fix this housing crisis if you don’t address the state of California.

The plan that came out has one elemental problem (there are others but this one is a deal breaker) – it only applies to Fannie Mae/Freddie Mac backed loans.  Translation:  if the loan is over $417,000, no deal.

Let’s examine this just a bit.  In most parts of Orange County, in 2004,  2005, 2006, and 2007, you couldn’t get much more than a very small condo for $417,000.  You couldn’t buy a single family home in most parts of Orange County for under $600,000.   The people that are most at risk are the people that purchased during that period of time- and the big Affordability Plan – doesn’t apply to them.

Look at the numbers for the big California markets – Los Angeles, San Diego, the Bay Area – it doesn’t change.

So call me crazy, but I don’t get it.  Hell, I’m happy for the folks in the midwest that this has an impact on.  I’m happy for the people that will benefit from it.  But I’m not sure this solves the problem at hand.

You can solve this for the folks in Kansas, but if you leave out 8 out of 10 of the worst housing markets in the country, are you really addressing core of the problem?  Just sayin’.

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