Every month we hear how the housing market is doing better. Then we realize the media are talking about everywhere but here in Nevada. The Las Vegas Valley is the epicenter of our nation’s housing crisis. Many of us have seen our home values drop more than 50%. We have watched our family and friends pack up and leave our community. The statistics are staggering: 1 in 177 homes are somewhere in the foreclosure process, and over 70% of our homes are underwater. As a member of Congress from Nevada, the housing crisis will be a top priority.
There are many ways we could address the housing crisis. Most politicians will promise quick solutions and false hope. I preface this discussion with the fact that I am a free-market conservative seeking long-term resolution to this government-facilitated disaster. President Obama’s most recent rescue plan clearly will not help many people here in District 1 or Nevada. In fact, even the President estimates that only 850,000 people may be helped. Well, that leaves out several million Americans. I bet we are among the millions left out again.
We must keep our proposals financially sound, sensible, and easy to understand while making the programs broad enough to help those hardest hit. Today’s solutions leave most Nevada families out in the cold.
I believe fixing our housing crisis is a three-phase plan:
- No cost refinancing regardless of being underwater
- Principal reductions
- Traditional resale
In the long run, the basic economic principle of “Supply and Demand,” will win out. It is just a matter of who controls the process. I recommend we control the process this time and do so thoughtfully, but quickly.
Our immediate goal should be to make monthly mortgage payments affordable by refinancing 100% of the current loan at lower interest rates and at no cost to the homeowner (and without steps that would be done in a transfer/sale). This would be considered a contract modification, not a new loan. The result is that we keep people in their homes and out of foreclosure and reduce the “supply” of homes for sale. This would go a long way to stabilizing the market and stopping any further price drops. This would set the stage for house prices to start to rise again….and begin to restore the Trillions of home equity lost. The president’s current plan falls far short of what is needed to help enough people “solidify” enough loans. His plan also calls for too much finessing. That is why it will not work and our homes will continue to drop in value.As a free market supporter, I am hesitant to get government involved in solving problems like this for which they don’t have much expertise. But, Congressional action facilitated, if not caused, the housing bubble by forcing lenders to make mortgages to people who were not qualified. Government still stands in the way of real progress because of legislation such as Dodd-Frank. Sensible policies that respect the free market must be initiated and pursued faithfully in order to resolve the housing market disaster.
Further policies such as reducing the principal owed can be a next step, but are likely best pursued on an individual case-by-case basis.
Once the market is stabilized, homes prices will start to rise. As homes become the great investment that they traditionally were, more people will buy them and long-term growth will return.