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Read this week's AJC article |
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FIX WHATS BROKEN IN OUR REAL ESTATE MARKET
All agree that our real estate market is suffering. Here are three
areas where I think the system is “broken” with some possible fixes:
1. It’s the foreclosures, stupid!
The real estate market is trying desperately to make a modest recovery,
but it is impossible to establish any kind of pricing stability when
the market is flooded with foreclosures, which undermine values and are
absolutely toxic to any neighborhood in which they are located.
POSSIBLE FIX: Encourage meaningful loan modifications to keep owners in their homes.
Loan modifications could allow millions to stay in their homes and
continue making some level of monthly payments. But servicing lenders
are currently unwilling to offer them because they fear their liability
to the note holders will come back and bite them.
Appropriate federal legislation could allow lenders to be held harmless
of liability if they engage in a good faith effort at restructuring and
the loan eventually is charged off.
2. The existing inventory of vacant bank-owned homes is poisoning
markets nationwide as they sit empty and deteriorate. They attract
crime and vagrancy, and decline in appeal until their value approaches
zero. But financing is only available to owner-occupants for homes in
excellent condition.
POSSIBLE FIX: MAKE COMMON SENSE FINANCING AVAILABLE TO INVESTORS
The FDIC has so restricted banks ability to lend on real estate that
it's almost impossible for investors to acquire these vacant houses for
rehab and return to market. And even if they do it with personal funds,
no “take-out” refinance mortgages exist from Fannie Mae or FHA to allow
investors to replace their funds and rehab the next house.
Federal legislation could make “common sense” loans available to
investors who are ready, willing and able to return these homes to the
market.
3. Restrictive code requirements and expensive federal rules make it
harder than ever for anyone to repair a damaged house. Lead based paint
rules and codes requiring complete upgrades artificially boost the
costs of rehab.
POSSIBLE FIX: Provide one-time exemptions for homes which are in or
have avoided the foreclosure process from onerous regulatory
requirements unrelated to safety. Stop using licenses, EPA regulations
and county codes to achieve social ends, at least temporarily.
A good example of this problem is a recent regulation in DeKalb county.
It requires any applicant for water service to prove that all water
consuming devices in the residence have been professionally replaced
with so-called "low flow" devices. Not only does it add significantly
to the cost of a rehab (or even the sale of) any existing home, the
work may not be performed by anyone other than a licensed plumber.
While the idea of water conservation is laudable, it puts renovators
and home sellers at a substantial disadvantage at a time when we can
least afford it.
These suggestions may not solve all our nation's economic woes, but
I believe they would be a step in the right direction.
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