More on Treasury 4.5% Mortgage ‘Plan’
by Tom on December 4, 2008
in Market Musings
Diana Olick of CNBC wrote a great article about the proposed 4.5% bailout plan which I’ve spent 80% of my day discussing with prospective borrowers. I’ll have more after the excerpts….
……..Of course I’m talking about the Treasury proposal/possibility/plan to buy mortgage debt at a rate that would allow lenders to offer buyers a 4.5 percent interest rate on the 30-year fixed…….
Now we know the National Association of Realtors was pushing for this plan and members have recentow we know the National Association of Realtors was pushing for this plan and members have recently had conversations about it with Treasury officials. But leaking it to the media just throws another road block up in home sales, as potential buyers say, “Hmm, best wait for that yummy new rate!……”
(Note: I have no idea if someone there leaked it. )…..
So the big Treasury bailout saves the median home buyer $89/month. (Of course, it’s a bigger savings if you buy a bigger home, but I’m just going by the median.) Is $89/month enough to save the housing market?
Diana Olick’s Realty Check: Treasury 4.5% Mortgage ‘Plan’ – Realty Check with Diana Olick – CNBC.com.
Okay, Tom here – read the entire article of Diana’s, but a couple of points that I agree with:
1. The change in rates from 5.5 to 4.5 is not enough to change enough buyers attitudes so that we can really turn the housing market around.
2. Artificially inflating housing prices (which is what would happen if this worked – which it won’t) is counter productive in the long run. We’re merely delaying the inevitable adjustments.
The only issue that I take with what Diana’s column is the statement that foreclosure mitigation is what the government should be working on. That only delays the inevitable as well. The government should focus on one thing which will eventually adjust the rest of them:
Jobs – creating lots of decent paying jobs.
What do you think?
