Everybody’s got a plan, nobody’s got an answer…

From recent news feeds, it appears that some Congressional leaders are already at work on the next big bailout plan for real estate, before the current plan has even had a chance to really get started. There appears to be general agreement, at least among the Democratic leadership, that more needs to be done, and fast. Congress is considering several tax credit proposals that have been put forth by various real estate industry parties.

The National Association of Realtors already is pushing a plan that would give a tax credit to all buyers of houses nationwide -- not just first time purchasers -- and would make the credit non-repayable. Under housing legislation passed this summer, first time buyers can qualify for a $7,500 federal tax credit, but they have to agree to pay it back to the government over a period of years, or whenever they sell the property.

Though early estimates indicated that thousands of buyers would rush into the market to take advantage of what amounted to an interest-free loan from the government, Dr. Lawrence Yun says the payback requirement has turned off a lot of buyers and reduced the effectiveness of the credit. Yun says a larger credit than $7,500 "would be better," but as long as the repayment feature is removed, the current amount should be sufficient to stimulate sales and reduce unsold housing inventories.

Meanwhile, the National Association of Home Builders (NAHB) plans to ask Congress for an expanded credit as high as $10,000 to $12,000, with no repayment, and is working on a program to "monetize" the credit up front so that it could be used for immediate down payment cash by purchasers.

Under the builders' plan, private lenders would extend loans to home buyers at or before settlement; much like tax refund anticipation lenders now provide cash in advance to consumers who are expecting refunds on their federal income tax returns. The down payment cash would be paid back, plus interest, when the home purchasers received their tax credits the following year.

Even if both plans were approved and made law, we still have the issue in Michigan that our local economy and job market are both failing and flailing. The exodus from the state continues and will only get larger if the local car companies continue to implode and shed jobs. Our state needs more than tax breaks for buyers. We need jobs so that more people can afford to become buyers.

I fear that we are undergoing a fundamental reset of our state’s economy, away from the automotive industry, but towards a largely unknown future. While the governor’s plan to increase tourism is a start, we can’t all become tour guides for the hoards of out-of-state visitors that Lansing hopes we will attract to our pleasant peninsula. The wonks in Lansing keep touting our great workforce of engineers and skilled workers, but those are the folks who are leaving the state in search of work; and they are leaving behind an increasing number of empty houses to add to the local real estate inventory. So, offering tax breaks to a state full of laid-off, ex-auto-workers may not work for us. Who’s got the next big idea?