Cover story: Housing industry hopes for an Obama boost

Real estate professionals are urging President-elect Barack Obama to take immediate and bold steps to cure the current housing crisis. Still reeling from falling home prices, record foreclosures and a tight credit market, many in the real estate business are hoping for change in the new year and wonder what an Obama administration will actually mean for real estate and housing issues.

Mr. Obama campaigned on making the housing industry one of his top priorities and acknowledged that, during the past two years, most homeowners lost 20 percent of the value of their homes or more. He spoke about wanting to help homeowners pay their mortgages, stay in their homes and avoid painful tax increases.

Furthermore, he has said that he will instruct the secretary of the Treasury and the secretary of Housing and Urban Development (HUD) to move more aggressively to modify the terms of mortgages, enact a 90-day foreclosure moratorium for homeowners who are acting in good faith, create a universal mortgage tax credit, ensure more accountability in the subprime-mortgage industry and mandate accurate loan disclosure.

Industry insiders such as Barbara Owens, broker and owner of Lady With the Hat Real Estate Center Inc. in Manassas, are eager to see a change. She says, “I think that we need to inject our real estate industry with some realistic prescription dosages that work at the sources of the infection, not just a Band-Aid that is thrown away after one use.”

Ms. Owens would like to see some sort of bailout for the homeowners who have been faithfully paying their nonappreciating mortgages through the years.

“It would be great if the Obama administration helped existing homeowners with a mandatory reduction of the existing mortgages by the banks to match the comparative market value of their loan in today’s resale market,” Ms. Owens says.

This action would stimulate homeowners with an incentive to continue to pay for their homes and allow for homeowners to start building some appreciation in their homes and “not to just walk away from this depreciating cancerous investment,” according to Ms. Owens.

Joseph Himali, president of the Greater Capital Area Association of Realtors, believes that in this day of foreclosures and short sales, the banks are the main issue. “The number one issue Realtors are running into is that it’s very difficult to process and get those transactions to go through.”

He believes that the best thing that could happen is “to get the banks to acknowledge what the market is, clear the bad loans and allow the market to function.”

At present, the housing market is anything but functional, Mr. Himali says. “Even when you finally get somebody to buy and sell, the bank will sit on the transaction for months and not respond,” he says. “In the meantime, the market has declined a little bit more, the house is worth less and the buyers want to renegotiate…. If we could get the banks to start responding in a timely manner, we’ll be able to clear the inventory and turn this market around.”

Mr. Himali says another thing that would be helpful to the high-priced Washington region is to change the conforming and superconforming loan limits that are set so low that it’s difficult to sell properties that are $800,000 or more.

“It may not seem as much as a big deal, but if you’re working in the inner suburbs or inside the city, $800,000 doesn’t buy you a whole lot.” He adds that people in lower-priced houses can’t move up because they can’t get a loan, so they’re not selling.

“This means there are no buyers, and it’s killing the market, which again comes back to the banks; they are so dysfunctional and the loans are so difficult.”

Growing foreclosure rates also continue to plague the country, as well as the Washington region, as more homeowners are having trouble making their mortgage payments.

Mr. Obama told Realtor magazine this fall that he wants to create a $10 billion foreclosure-prevention fund that works in tandem with state, local and community nonprofit efforts to help households facing foreclosure renegotiate with lenders or put their homes on the market.

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