Here's my take on the Stimulus situation as it pertains to the real estate market.

There are three primary components of the Stimulus package and the recently announced Treasury Plan that impact the residential real estate market:

Loan Limits Raised in High Cost Areas

Government backed loan limits were raised in high cost areas. That doesn’t have a direct impact on our Spokane market, but it does help some of our feeder markets. When the markets are stabilized in places like Seattle and California, it is easier for buyers to migrate into our community. More buyers = quicker stabilization of prices and the return to slow and steady appreciation.

The Tax Credit is Now a Real Tax Credit

The tax credit for first time homebuyers will be raised to $8,000 with NO payback [a true credit]. There are some qualifying parameters but essentially, if you earn less than $150,000 as a married couple, or $75,000 as an individual and have not owned a home in the previous three years, you qualify.

Relief for Distressed Homeowners

The bill contains over $50 billion for foreclosure mitigation. Coupled with Geitner’s Treasury plan signaling that the second half of the TARP funds will be used to mitigate foreclosures through a government guarantee, that should help to slow down the flood of distressed properties entering the supply side of the market.  In my opinion, this is the most critical piece of the puzzle necessary to bring the market back to normalcy.

The Bottom Line…..Higher loan limits and real tax credits will create more buyers. Foreclosure mitigation, if successful, will reduce the number of homes on the market and protect sellers from competing with distressed properties. It sounds like a reasonable plan to rebalance the supply v. demand equation and bring stability and appreciation back to the marketplace. However, a plan is only as good as its successful execution so we’ll be watching closely!

Two days ago, the Senate acted even more liberaly by approving an amendment to their bill that offers up to a $15,000 tax credit to people that purchase a home in the next year.  The credit would apply to anyone, not just first time homebuyers and you would not need to repay the credit. The credit is based on 10% of the purchase price of the home and the credit is spread over two years.  So for example, if you buy a house with a purchase price of $300,000, you would qualify for the maximum credit of $15,000.  The first year you claim the credit, you receive $7,500, and you would receive the remaining $7,500 the next year.