Orlando Real Estate

Senator,

As former HUD Secretary, I am sure that you can understand the importance of the housing market to the overall economy. Everyone has been pointing fingers and trying to place the blame for our current economic situation, but the truth is that everybody had some hand in getting us to where we are today. Fear and greed dominated the real estate market creating a huge run up in prices and over-building. Things were progressing at an unsustainable pace.

We stand today with a tremendous oversupply of housing which has caused the precipitous drop in home values. I recall Federal Reserve Chairman Greenspan saying that there was an additional $1,000 per year in consumer spending for every $10,000 in home equity created by the run up. Here in Orlando prices are off $120,000 from their peak. While I don't know if Mr. Greenspans numbers still hold true, it is apparent that consumer confidence and spending have dropped with home values.

My suggestion, somewhat radical, is to attack the problem from the supply side. Pumping cash into banks has yet to get them to free up lending, in fact they have tightened requirements. They have become extremely inefficient at handling foreclosures, short sales and even making new loans. There are roughly 3.6 million homes for sale in a marketplace that suggest a balanced supply should be about 2.4 million homes. There are also about 1 million foreclosures in the market. My suggestion is for the government to purchase these undervalued assets (homes not securities). Do not rent them out; do not make them public assistance housing; hold them. Many will need some repairs, and all will need regular maintenance.

This will stabilize the real estate market, and inject billions into the banks that hold these properties. At the same time, it frees these banks from having to manage them. I estimate that $300 billion should be enough to purchase and hold these homes for up to two years. They can be sold on the open market as each local market is able to re-absorb them. It is not a bailout, and in the end will have a much lower cost than just giving the banks more tax payer dollars to squander. It is a radical idea, but it addresses the problem at its core.

Wouldn't it be cool if the two Senators from Florida, (neighbors) could reach across the aisle and make this plan work.

Sincerely,
David W. Welch