Why Yesterday Was Important
Yesterday was a really big day in real estate. Two big announcements were made that are going to (hopefully) have a huge impact on the real estate market.
Fannie Mae introduced their new ‘Deed for Lease’ program. This program will allow home owners with a mortgage through Fannie Mae to avoid foreclosure and still live in their homes. After missed payments, the owners have the option of handing the deed to the home over to Fannie Mae. At that time, the now previous owners have the option to lease the home. The initial lease terms are for one year, with monthly extensions available after that point. This will help to ease the transition for owners, and help the neighborhoods which have seen a lot of recent foreclosures.
The idea is that this will prevent more of a backlog in the real estate market. Also, instead of homes sitting empty (and susceptible to vandals), they are lived in by people who already care about the property. Unfortunately, there is a lot of information missing about the program. Will the program’s participants eventually be able to buy back their properties, once they are back on their feet? I would assume that would probably be possible, as it keeps the prior owners invested in the care of the property, but there aren’t any official details about that yet. Who will be in charge of repairs and regular maintenance?
The second big announcement was that the bill expanding the first time buyer tax credit has passed both the House and Congress. Pending the signature of President Obama, the program will be extended through April 30, 2010. By that date, first time buyers must have a signed buying agreement. The home does not actually have to close until June 30th.
There are a few changes to the program that will be put in place once it has been signed into action. The most significant is that the $8000 tax credit has been opened up to more buyers. While it is still only available to first time buyers (those who do not own a primary residence and who have not owned a home in the past three years), the income limits have been raised. Originally, the minimum for a single buyer was $75,000, or $150,000 for couples. It has now been increased to $125,000 for singles and $225,000 for couples. The other change affects recently deployed military personnel who have been deployed for at least 90 days in 2009/2010. They will have until April 30, 2011 to take part in this program.
These two new programs are hoped to each have a significant role in turning around the real estate market for good. By preventing foreclosed homes from going up for sale, the actual inventory of homes for sale should begin to stabilize. With more new buyers taking part in the tax credit incentive, more homes will be sold, eventually decreasing inventory. If participants in Fannie Mae’s Deeds for Lease program are able to buy back their properties, thus preventing these homes from ever reaching the market, everything will stabilize even sooner. This will help home prices to go back up, and the market will return to pre-crash levels. At least, that’s the plan.