The housing market has come to a screeching halt due to what many in the real estate world are calling the “lock in” effect. A large majority of homeowners are locked into under 3 percent mortgages and have no reason to sell and purchase a new home at 6-7% interest rates. Without any incentive to sell, the housing market is stuck with extremely low supply and driving prices higher.
The key to unlocking a large amount of housing supply could be to offer single family real estate investors an incentive to sell their homes. Many investors will hold forever, because selling the home will cause a large capital gains tax to be owed on the profits.
I would propose a waiver over the next couple years for any investor that sells their single family homes. After that time frame, take away some of the tax incentives out there for owning a single family investment property. We aren’t going to see 3-4% interest rates again, so something extreme needs to happen to unlock this supply for first time home buyers.
Banning ownership of homes by anyone is not helpful to supply. Corporations bought homes in bulk during the financial crisis which likely reduced the decline in prices. Now, they are building entire communities of SFH rentals.
The more important change is to allow more density and development wherever demand supports it.
That’s an interesting concept I haven’t thought of… though, why not just lower the interest rates back to the levels they used to be? Or is that just a pipe dream at this point? I personally am locked in at 2.75% and if I sold today and bought a house for the same price I sold my house, I couldn’t afford it at a 7-8% interest rate.
I don’t want to pretend I know the ins and outs of economics, but just lowering the interest rates back down to 2.75% isn’t how it works. There are many factors that go into it, and I don’t think they can just wave a wand to do that. I think we are looking at a best case scenario of 5%, which still makes giving up your rate very difficult.
Agreed, the red tape in zoning has to be changed drastically. It should not take years for approvals, this country needs housing and there are so few developers that have the time and money necessary to be able to build.
I don’t see how banning LLC’s, corporations, and foreign nationals doesn’t help supply. It absolutely reduces demand when you have fewer “people” in the market for the same item. Right now where I live, 1st time home buyers can not afford houses, while llc’s are buying them to rent out. I agree with allowing more development and making it easier to build, however, if companies are seeing that it’s profitable to keep everyone renting, they’re going to continue to gobble up the market and keep 1st time buyers out priced. Just as you stated, they’re building entire communities of SFH rentals. Single family houses should be reserved for American single families to own. LLC’s/Corps can build apartments and duplexes.
Personal experience.
During the market & Banking collapse 2009-10. OUR Gov. had a tremendous opportunity , but they blew it. The Fed gave Banks a trillion $ to bail them out. The Banks still had the properties, then foreclosed on millions of homes. So Banks benefited twice and did u know the Banks then take property owners to Court for the deficit between what was owed and what amount $ they auctioned the property So if u owed $300,000. and the Bank auctioned the property for $200,000. You will be sued for $100,000. ( in many cases the Bank buys it back) . Then the Bank sells the property. hense benefited 3 times. At the time I gave a simple solution to the Housing crash. Give the Banks the money BUT TAKE THE DEEDS. Think about it. The Fed could have left people in their homes , lowered the rental rate for millions of properties, kept the property as rentals and mantained a magnificent asset for collateral or to raise capital while maintaining reasonable housing for millions of families and remember there were huge commercial opportunites as well. I think todays value be be at least $ trillion. But of course the Fed Gov did not seize the opportunity. The Bamks benefited greatly and Companies like BlackRock did what the Fed Gov could have done w/ the stroke of the pen. lastly ,why foes it appear the only means OUR GOV knows how to fix a problem is raise taxes ,fees, etc. ? Anybody ?
lastly ,why foes it appear the only means OUR GOV knows how to fix a problem is raise taxes ,fees, etc. ? Anybody ?