December 1971 Real estate area – Words 612

Real Estate Supply and Demand

Decrease The Supply Of Available Homes Not The Demand

One way to rebuild a healthy real estate market is to decrease the amount of homes available for sale. Most of our recent efforts have been geared towards increasing the demand to buy homes. It’s pretty obvious that several experts and the media aren’t going to stop highlighting every negative aspect in the real estate market, so it might be a little difficult to increase demand. It’s their job to report the news but why can’t they report positive news as well? When you want to know about something don’t you turn to the news or a well-known expert?

What if a program or several programs were developed that encouraged owning a rental property or keeping your home off the market? If there were a few programs homeowners could choose which works best for their situation.

The government could give tax incentives to sellers that agreed to keep their property off the market for X amount of years? This might entice investors or homeowners because their payoff from the sale of their home if they agreed to hold onto their investment would be greater because of the tax incentives.

The government or lenders could offer an annuity type of loan to homeowners. The loan would slowly tack onto the principle of the home loan each month. Homeowners wouldn’t receive a large lump sum of money, but their mortgage payment would decrease by X amount each month and would slowly increase over the years. The lender and borrower would determine how much of a loan was suitable based on the homeowners needs and the lenders ability. The lender could stop paying the annuity at any time if a borrower failed to meet their payment obligations.

Lenders could offer locked or lower interest rates to homeowners that agree not to refinance or sell their homes for X amount of years same concept as a prepayment penalty. They could set the homeowners up on steadily increasing payment plan giving them lower payments initially similar to an ARM but instead of giving these incentives to new customers lenders will be trying to avoid costly foreclosures.

Hopefully these programs would keep homes off the market and help regulate when homes are placed back on the market. Programs like these would interest some sellers because many of them can’t sell their homes right now; in many cases if they do they’ll take a loss. I think most sellers would love to hold if they could cover or minimize their negative monthly cashflow and others will be happy with keeping more of their money from the eventual sale of their homes. Not everyone would qualify or benefit from programs like these, but it could be a nice way to decrease the supply of homes for sale and improve the health of the real estate market.

I’m pretty sure that well need to develop several solutions to fix some of the mistakes or oversights that helped fuel this over correction. I know real estate is cyclical but feel that some decisions have led to a rougher market. There are some possible downsides to this solution such as the probable increase in new home cancellations possibility of homeowners defaulting on new agreements and difficulty in implementing these plans but there definitely could be a viable solution found in focusing on our supply of homes for sale as opposed to trying to increase the demand. Many of our markets have great potential and with a little help we could be back on track!

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