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We all love to hear about free money. But the truth of the matter is nothing is free! That holds especially true when it comes to the current stimulus language being floated on Capitol Hill. With rates floating in the 5-6% range, one wonders what impact subsidizing a further drop in rates will have? Most people looking to buy right now are not on the fence because of payments. They are on the fence because they are uncertain of the market as a whole and whether or not now is the time to buy. They are concerned about their job security and whether they will be able to make payments on an ongoing basis.
If the difference of 30-50 dollars a month is a decision maker, then you should really reconsider whether buying a home is for you. These types of decisons are part of the reason the foreclosure rate is so high currently. The reduction in rate allows you to purchase a little more home for the same dollar, but it should not be a decision factor to buy or not to buy.
The answer here is how do we stimulate lending so that money is flowing. With money flowing, the current rate environment is very buyer friendly to say the least. Eliminating the assests from these bank balance sheets is a good way to start the process of credit flow. Making mortgage money available to buyers, and and having them feel confident about their purchase are the 2 factors that need to be present. Offering slightly reduced mortgage rates, while nice, does nothing to address these issues. If we truly are going to spend billions upon billions of our tax dollars, should we not spend it on the cure and not the symptoms?
Don't get me wrong, I would love to see home sales move north from here. An increase would indicate alot of things are potentially on the mend, but if it must comes on the back of the taxpayers, should'nt we ask for little more precision? Precision that comes from using a scalpel instead of a hatchet?
While I have heard worse ideas being floated, this one definitely needs to have a litmus test applied again before further consideration. But in the end, if it passes, let's hope I am wrong about the effect and we see a return on investment. I have been in the mortgage industry for over 20 years and I can tell you I enjoy nothing more than helping peopple with their part of the Amereican Dream!
