ABOLISH CAPITAL GAINS TAXES

This could be our Golden Parachute.

Okay I didn’t go to Harvard business school but I do think there is a simple solution to the problem of what to do with all of these delinquent mortgages that doesn’t have to cost the taxpayers 700 billion dollars. I wish that I could say I thought it up my self but I didn’t. But at least I am smart enough to recognize a great idea when I hear one. I first got wind of this idea when a colleague sent me a link to a Dave Ramsey article and then I had to turn around and shout it from the rooftops.

One of the most interesting things about this plan you abolish capital gains taxes completely. This lets investors buy these homes facing foreclosure and turn them around. If they don’t pay capital gains on their profits suddenly it becomes worthwhile to do it. Both the stock market and the real estate market would benefit from this.

Then you stiffen the rules for lenders requiring them to rewrite all of the loans that amount to nothing more than predatory lending to begin with. In other words if you were unethical enough to write a loan for someone who actually could not afford the payment when the loan adjusts, then instead of going to jail for loan fraud, Mr Predatory Lender, you can rewrite the loan to a 6% fixed interest rate the borrower may actually be able to pay.

There is a lot more to his plan that makes sense. Follow the link and read the article. Truthfully I haven’t ever listened to his radio show or read any of his books. I don’t really even know who he is

I would add something to Mr Ramsey’s plan. A simple thing that you could do is to make all these new loans rewritten at 6% fixed fully assumable by anyone who actually qualifies for the loan under normal underwriting guidelines. So if the struggling homeowner is facing a health care crisis, or used to work for WaMu, they might be actually able to sell their home to someone.

The biggest problem I have with the bailout and the subsequent nightmare is that it’s all too quick, with no time for other ideas to come to the surface. We are being told that there are dire consequences if we don’t bail out these banks this week. But we are being told this by the same liars that told us that there were weapons of mass destruction in Iraq! So are we going to let ourselves get scared into the second worst decision of the 21 century?

The House Committee on Financial Services, with Congressman Barney Frank chairman, has released the text of the draft of The Emergency Economic Stabilization Act of 2008

The bill, widely touted as the “The bailout bill” will go to House of Representatives tomorrow and to the Senate on Wednesday. The speed at which this bill was crafted gives me a profound sense of dread that there is much hinging on the passage of this bill… perhaps much more than they are telling us.

My basic feeling is that if the banks made risky loans and are in danger of going under because of that, we should let them fail. But the speed at which this bill was crafted and the willingness of the proponents of this bill to reach across the isle, leads me to believe that there are some dire consequences brewing, that they are not sharing with the American people. The obvious answer, you might be thinking, is that I am falling for the scare tactics employed by the backers of this bill, but it really doesn’t seem that way to me.

A brief summary of the 110 page draft can be found here: Summary of the “Emergency Economic Stabilization Act of 2008″ . Congressman Frank’s office prepared a Section by section Analysis of the Legislation.

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Spring has sprung, the weather is great. Interest rates are wobbling a little but they are still at all time lows. The endless droning of the bobbling head news guys who tell us how bad it is….and how many foreclosures and short sales there are, is having an interesting effect. People are starting to think that this may actually be a good time to buy a house. The market is really pretty active.

For the first time in decades in Atlanta there are homes that you can buy and rent out and actually make positive cash flow. There are neighborhoods that have been out of reach for lots of folks who would love to live there that suddenly are having some actually affordable homes on the market. It’s no longer true that you can’t get a decent home in a safe neighborhood under $300,000 any more. There are actually lots of homes for sale in safe areas closer to $200,000. And there are homes out there that I would live in myself or let my daughter live in under $100,000! …even inside the perimeter, in Atlanta Georgia today!

You can now own a decent home at an affordable price!

The Intown areas that were being renovated heavily and flipped a few years ago, like Reynoldstown, Kirkwood, Edgewood, East Atlanta and East Point had begun to get pretty pricey. When the crunch started a lot of the investors/ house flippers with short term hard money loans were left holding the bag. A number of big builders went down because they were sitting on too much inventory. So a lot of these those houses are now on the market as foreclosures. They are in various stages of completion, some are done and move in ready and some have been gutted and have nothing put back. A house in the West End that I personally sold (as the listing agent) nearly 2 years ago to a first time homebuyer for $134,900, recently went on the market in exactly the same condition for $44,900. This was not a loan fraud deal, no money went back to the purchaser under the table. This was an educated buyer who bought a home to live in and lost it. What this means is that if you missed the boat ten years ago when prices were low, you have been given a second chance to own a home at an affordable price. There are a lot of people who get it. When a home goes on the market in these types of neighborhoods for $64,000 is sells, frequently in a bidding contest.

We have all been hearing about the doom and gloom of the real estate market, so I thought I would do some research and see how bad it actually is for Virginia Highland. These numbers are for single family detached homes only, i.e. no condos or lofts or attached town homes.

Just for those of you who like to get straight to the point: Yes, the market is down in terms of overall volume but the average prices are up and the average days on the market is down !

I will start with 2006. In the year 2006 there were 191 properties listed in the First Multiple Listing Service in Virginia Highland. These are properties that actually had a list date between Jan 1 2006 and Jan 1 2007. Obviously there were some homes on the market on Dec 31 2005 that were in the mix, so understand that when looking at these numbers. During 2006 there were 151 closings in Virginia Highlands. During the same time period, 11 properties were withdrawn (some of these were re-listed with different agents and some sold For Sale by Owner.) and 29 properties expired (also some of these re-listed with other agents or sold privately). So the ratio of listed property to sold and closed property for 2006 was 1.26 properties listed for each property sold.

In 2007 there were 240 properties listed in Virginia Highland between Jan 1 2007 and Jan 1 2008. In the same time period there were 85 properties closed, 52 properties were withdrawn and 44 properties expired. The ratio of properties listed to properties sold was 2.85 properties listed for each one sold.

So the market is definitely down. We sold 55% of the number of homes in Virginia Highland in 2007 that we did in 2006.

There were some other interesting observations I made. The average sold price went up. The average days on the market went down. The maximum sold price went down by almost 200K. Expireds were up by 50%. In 2007 35% of the homes that were listed, were sold. While in 2006, 79% of the homes that were listed were able to close.

Everyone knows that we are in a Buyer’s market. You hear about it on the network news and read about it in the Atlanta paper…. in the Atlanta area we are in a Buyer’s Market!

One of the big brokerages has billboards around Atlanta which show how many homes are on the market today. It was up to 109,000 about a month ago and now it is down to 101,000. You will normally see it refresh and have the numbers change as you drive by. It catches my attention every time I drive by! The company is attempting to advertise the web search tool that they offer, but in my opinion, the only message it is really sending is that there are a boatload of houses for sale today in Atlanta Georgia!

I think the billboard undermines any feelings of optimism that may be brewing out there and they may be turning more Buyers off than they are turning on!

….Really, the opportunities for home-buyers, especially first time home-buyers, are great! The interest rates are still at historic lows and prices are way down as well.

It isn’t that every single house is reduced or can be bought at a discount, there are still plenty of homes that sell for roughly what they always have sold for. What is happening is that in the Atlanta area there are literally thousands of foreclosures and pre-foreclosures in the market and that is where the real bargains are.

What a lot of Buyers aren’t understanding is that there are plenty of homeowners who have taken beautiful care of their homes who are not in any kind of financial difficulty who aren’t going to be bullied into giving their home away. One of the truisms in Real Estate, is that even in a Buyer’s market is that the real “steals” are almost always a little run down. The “have to sell” types generally don’t have the clean, perfectly decorated home that the happy contented homeowner has. So although you will occasionally see some perfect homes at a discount the vast majority will be some kind of a fixer upper.

Realtors today are contending with Buyers who are finding themselves frustrated. Because the media leads everyone to believe that the prices are down across the board, the Buyers are suprised when after months of searching, they finally find a house in their price range that looks like Martha Stewart’s dream cottage and they discover that those Sellers wont reduce the price by 20%! It’s Murphy’s law! The perfect home is virtually never negotiable, these Sellers normally have great pride of ownership and have worked hard on maintenance. This is not a hard and fast rule but it’s good to know it going in, because the person searching for great schools, space style and decor, will probably have to make offers on 50 wonderful places in order to find one that will reduce the price drastically.

I saw something interesting while looking at the sales for the last 12 months (12/20/2006-12/20/2007) in the Candler Park neighborhood. We have exactly the same number of sales that we did in the period from 12/20/2005-12/20/2006. There were 51 sales listed in the FMLS during both 12 month periods. That kind of disproves the theory that the market has softened this year!

Right now there are 22 properties on the market and 4 of them are under contract. They range from $299,000 to $949,000 and the average price is $526,888! This is the first time in a few years that we have seen some homes sell around $300K or less, but there are more homes selling at the top of the range than ever (mostly new construction) so the averages have been going up.

If you are interested in living in this neighborhood you can see what’s for sale on my Candler Park page and I would be happy to show you any that look interesting. I have been living in this great area since 1991 and think it’s Atlanta’s best neighborhood!