Oct

Next … Direct Housing Bailout?

housing bailout National Association of Realtors and the National Association of Home Builders are calling for another stimulus package aimed directly at assisting home buyers. Well, why not? We are bailing out Wall Street, foreign investors, banks & insurance companies.

Why not? The recent pick-up in real estate sales in the last few months show that the system works without government interference. In any area, when home prices reach a level considered to be good buy, people will step up and buy.

Sooner or later, housing prices, like water, will find their own level. That level is what people can afford to pay, not what the government can borrow and lend to them to make a down payment. Unfortunately, in many areas, it appears that we are still some distance away from housing prices finding their level.

For those who think a government intervention is the only way out, I would say do it without direct taxpayer money. The undisputed key to this recovery is housing. If the government truly wants to ignite a fire under the housing market, I personally would propose a very simplistic approach that would have immediate results.

The government should pass a bill that allows any home purchaser, owner-occupied or investor buyer, who buys a residential property within the next two years and holds that property for a minimum of three years (and a maximum of ten) to be free of federal capital gains taxes upon selling the property. The potential, tax-free profits on my idea would be a huge incentive for investors to jump back into the residential housing market. This increased demand would clear the built up housing inventory in a matter of months for most areas.

Some prior posts on the government bailout: