The View From Here

Dear friends:

I no sooner sat down to write this monthly message than breaking news from the Washington Post landed in my email in-box. Its headline proclaimed: “Economy grows in 3Q, signals end of recession.” The growth, the accompanying article said, “was fueled by government-supported spending on cars and homes, delivering the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.”

I think the operative word here is “fragile.” For no sooner had the “Cash for Clunkers” automobile incentive ended, than auto sales headed straight back into the doldrums. We can’t afford to let that happen after the first time home buyer tax incentive expires on November 30; if—as most economists concede—a recovering housing market is the single most important catalyst that will lead the rest of the economy out of the wilderness.

The tax credit has been so effective at stimulating sales and stabilizing home prices that continuing it seems like a no-brainer in light of a housing market that still exhibits contradictory signs of recovery. A significant number of new foreclosures are in the pipeline that could easily undo much of the progress that has been made toward reducing inventory and firming-up prices. Thus far, the housing tax credit has ignited a firestorm of sales that has helped shore-up home prices in spite of wave after wave of foreclosures and short sales.

Mark Zandi, chief economist for MoodysEconomy.com is among those supporting the extension. “Based on simulations of the MoodysEconomy.com macro model,” he writes, “the expanded tax credit, if extended through the end of 2010, would increase 2010 sales by almost 600,000 units. This in turn would generate $33 billion in additional real GDP, lifting growth in 2010 by almost 25 basis points.” In addition, benefits would flow to a range of industries hit especially hard by the housing crisis; including furniture, appliance and building supply retailers, property maintenance and repair businesses, real estate firms, insurance companies and mortgage lenders.

The idea of extending the tax incentive to include all buyers who have lived in their primary residence for at least five years—and whose combined household income is no more than $225,000 ($125,000 for an individual)—is now being readied for a vote before the Senate Finance Committee; and appears to enjoy rare bi-partisan support. That’s why we at Michael Saunders & Company join in advocating for an extension of the tax credit until at least mid-2010.

An extension will help your home maintain more of its present value while the market continues to stabilize. Please take a few moments to encourage your representatives in Washington to rally around the measure now being put forth in congress. This is one form of economic stimulus that is finding its way directly into the pockets of average Americans looking to own a piece of the American dream while it’s never been more affordable.

We hope you find this edition of Saunders@Home entertaining and informative. Read on and enjoy!

Cordially,

To email your U.S. Senators, go to the following link:
www.senate.gov/general/contact_information/senators_cfm.cfm

To write your representative in the U.S. House of Representatives, go to this link:
www.house.gov/writerep

We would love to hear your comments and suggestions as to what you would like to read in the weeks and months ahead. Please email them to me, care of editor@michaelsaunders.com. Meanwhile enjoy our nineteenth issue.

Did You Know? Our office in the lobby of The Ritz-Carlton Hotel in Sarasota is staffed by an elite team of real estate professionals with extensive knowledge and expertise in our area’s three Ritz-Carlton properties. Contact 941.364-8884 or visit michaelsaunders.com for more information.