Repo Trailer Homes For Sale

When the credit and housing bubbles burst, lawmakers of both parties said they were surprised at the impossibly large mortgages so many homeowners had taken out.

They shouldn’t have been, not any more than the fabled Capt. Renault was “shocked, shocked” that gambling was going on in his favorite Casablanca casino. Through a never ending series of new tax breaks and subsidies, and the expansion of existing ones, Congress and successive presidents have done everything in their power to get people to take on mortgage debt.

They have allowed borrowers to deduct interest on mortgages up to a $1 million. They have set the capital gains tax rate at 0% on profits from the sale of a primary residence, up to $500,000. And they have created and nurtured Fannie Mae and Freddie Mac, the government backed companies that dominate the mortgage industry, to expand lending to questionable borrowers, putting taxpayers at risk of multibillion dollar losses.

When all this produced a colossal housing bust, sending the economy toward free fall, Congress passed and President Obama signed a “temporary” tax credit of $8,000 for first time home buyers as part of the economic stimulus program. Now the threat of depression is gone, but with the credit set to expire on Nov. 30, the housing lobby is pushing to have it extended. Some in Congress even want to expand it to $15,000 and make it apply to all home buyers.

Ironically, though virtually all Republicans voted against the stimulus and continue to lambaste it, the biggest champion of expanding the housing program is Sen. Johnny Isakson, R-Ga., a former Realtor.

For a variety of reasons, the credit should be allowed to expire. To begin with, the housing market is starting to recover. The National Association of Realtors has reported four straight months of increased sales of existing homes. Moreover, tax credits are just another form of government spending, and the government which is running a $1.6 trillion deficit this year doesn’t have any money to spend. Extending the credit, which has already cost as much as $15 billion, would mean borrowing even more from future generations to aid today’s home buyers.

Perhaps most important, an array of influential lobbies bankers, automakers and so on will be watching to see whether Washington has the fortitude to wind down a stimulus program once it has begun to throw money at an influential industry. The housing lobby isn’t the only one salivating at the federal feeding trough.

The untold truth of housing tax breaks is that they don’t really make owning a home more affordable. That’s because markets have a way of adjusting. If the government subsidizes home buying, it increases the number of people in the market and the amount they can afford to pay, which drives up prices of existing homes.

For the home building, mortgage lending and real estate brokerage industries a potent three pronged housing lobby this means bigger profits. But for prospective new homeowners, it does relatively little.

Supporters of expanding the credit for first time buyers argue that now is no time to pull back. That is always their argument. Just as real estate agents say there is no bad time to purchase a home, for the housing lobby there is no bad time for a handout. Congress, however, shouldn’t buy it.

Foreclosures are continuing to set records despite the Obama administration’s $75 billion plan to help borrowers at risk of losing their homes.

There were 1.9 million foreclosure filings in the first six months of this year, a 15% increase from the first six months of 2008, according to a report today from RealtyTrac. One in 84 homes received a foreclosure filing in the first half of the year.

June was the fourth consecutive month that foreclosure filings surpassed 300,000, RealtyTrac says, and the number of properties receiving one or more filings in the second quarter totaled 889,829 the highest since RealtyTrac began issuing its report in 2005.

Foreclosure filings include default notices, auction sale notices and bank repossessions.

“The Obama plan doesn’t seem to be having a significant effect,” says Mark Zandi at Moody’s Economy.com. “I don’t think it’s going as well as they’d hoped for. Foreclosures will continue to rise through the end of the year.”

California led the states with the most foreclosure filings in the first half of 2009 – 391,611. That was 2.94%, or one in 34, of California’s homes.

Foreclosures are growing as more Americans lose their jobs or take pay cuts. The federal effort to help at risk homeowners includes giving lenders financial incentives to modify mortgages with more affordable terms.

Falling home values are also taking a toll. The high number of borrowers who find themselves owing more than their homes are worth presents a potentially significant risk of more foreclosures, according to RealtyTrac.

Not all economists agree. Some say there are significant signs that the housing market may be on the rebound.

Total inventory of unsold homes is falling. Inventory at the end of May fell 3.5% to 3.8 million previously occupied homes available for sale, which represents a 9.6 month supply and is down from a 10.1 month supply in April, according to the National Association of Realtors (NAR).

In addition, single family home sales rose 1.9% in May from April, NAR reported.

“Given the evidence, the housing market is turning around,” says Bernard Baumohl at Economic Outlook Group. “In the third quarter, we might see evidence that the rise in foreclosures has finally stopped. We’ve hit bottom on foreclosures.”

Brian Bethune, an economist at IHS Global Insight, says the deep and prolonged recession is mainly what is driving foreclosures now. “Foreclosure mitigation efforts do need to be stepped up, but they can only have a limited buffering effect. … The most urgent policy priority should be to jolt the economy out of the recession,” he says.

Home sales rose in most of the country in the second quarter compared with the first, a trend driven by falling prices, lower interest rates, and a tax credit for first time home buyers.

The sales increase is viewed as a positive sign that the struggling housing market is showing more signs of stabilization, even though foreclosures continue to escalate.

Existing home sales rose 3.8% to a seasonally adjusted annual rate of 4.76 million units in the second quarter from 4.58 million units in the first quarter, according to the National Association of Realtors (NAR). That is still 2.9% below the second quarter of 2008.

“We’re seeing a growing percentage of metropolitan areas (with home sales) up over the year, which is impressive,” says Joel Naroff, with Naroff Economic Advisors. “We’re seeing growing strength in a variety of areas across the country.”

But foreclosures are rising, and that’s pulling down home prices. Foreclosure filings were reported on 360,149 properties in July, according to a RealtyTrac report today. That’s an increase of nearly 7% from the previous month and a jump of 32% from July 2008.

Thirty nine states saw sales increases from the first quarter, and sales in nine states were higher than a year ago. Washington, D.C., showed both quarterly and annual rises.

Double digit gains in sales between the first and second quarters were seen in Idaho, Utah, New Mexico, Washington, Hawaii, New York, New Jersey, Maine, Vermont, Wisconsin, Indiana, South Dakota and Montana.

“This data suggests that the recovery is broadening,” says Lawrence Yun, chief economist with NAR. “Low interest rates and the tax credit (for first time home buyers) are beginning to pull buyers back into the market.”

But prices on existing homes are continuing to fall. The national median price for single family homes was $174,100 in the quarter, which is 15.6% lower than during the same period last year.

The largest sales gain between the first and second quarters was in Idaho, up 67.5%, followed by Hawaii, up 24.2%. New York was up 22.3% and Wisconsin’s sales rose 21.7%.

“It’s important to see the growth because of the volume (of homes) out there,” says Pat Lashinsky, CEO of ZipRealty. “We’re seeing inventory come down and the market come back into equilibrium.”