Do you remember when you were growing up and falling down all the time, Mom would put a band aid on your fleshy scrape to keep it from getting infected. That band aid made you feel really good, but it came with a price.

Removing a band aid from a messy wound is not a pleasant experience. There are two schools of thought on how to remove the band aid:

1. Take your time – Be very slow, gently trying to “peel” it away from the would without damaging new skin or pulling hairs out.
2. Grip it and rip it – Get hold of a tiny corner, count out loud from 1 to 3, then violently pull the band aid away from the wound in a nano-second.

Both ways cause pain, but most would argue that the latter produces better results (less pain and shorter recovery period).

The Real Estate Market Is In A Scrape

So why does somebody who writes a blog about real estate start a discussion about band aid removal? Great question … and the answer is because it was the best analogy that I could come up with to describe what is going on between our politicians and our wayward real estate market.

If you were paying attention on Friday, you might have heard that Senators reached a compromise to extend the $8,000 first time home buyer tax credit. They also added a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, housing-industry sources said.

Under this proposal, home buyers will have until June 30 to go to close on their purchases. But this is not a “done deal,” as the measure still faces votes in the full Senate and the House.

The Treatment For A Broken Real Estate Market Is “More of the Same?”

• Albert Einstein’s definition of insanity: “Doing the same thing over and over again and expecting different results.”
• Congress’s Solution to our housing market woes: Create unfunded financial incentives to propel the market beyond the extent to which it could perform under normal market conditions.

Hey, WAIT A MINUTE, isn’t this how we got here in the first place. Didn’t we (the government) push to achieve results in home ownership rates by creating loan programs for consumers who historically had a high rate of default? Didn’t this stimulate home-buying to such an elevated level that we produced significantly more homes than we needed?

Then, rather than see the good times come to an end, didn’t the mortgage industry create even crazier loan schemes to keep the good times rolling?

And roll they did.

Congress To Send Housing Market To Detox

[click to view Detox Plan as envisioned by Congress…]

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