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Rachel LaMar,…, Real Estate Pro in Carlsbad, CA

Do you think the government should be involved with the real estate market?

Asked by Rachel LaMar, J.D., Carlsbad, CA Sun Jul 24, 2011

There has been a lot of government intervention in the market, from buyer incentives, foreclosure prevention programs and attempts at lender regulation. Some say we need more, some say the government should stay out of the market or it will never heal. What do you think?

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Hi Rachel:

I can't imagine a scenario in which the government could not be involved in real estate. Through local government we zone neighborhoods so someone else can't put a garbage dump next to your well-kept home. Through county government we record the ownership of our property so we can feel secure that no one else can claim what we bought. Through the state and federal governments we create laws that protect us from the many property scams out there and ensure that we are not excluded from neighborhoods because of the color of our skin and other factors. And, also through the federal government, we regulate how the money markets treat us as owners and mortgage holders.

Perhaps the questions should be: 1) How much should the government be involved in real estate, and 2) In what areas does the government need to do a better job than it has in the recent past.

Kind regards,
Ron Rovtar
Prudential Real Estate of the Rockies
Days: 303.981.1617
Evenings: 303.473.1926
3 votes Thank Flag Link Mon Jul 25, 2011
Geez, Phil, are you suggesting that We The People abdicate our responsibility for self-government and leave it to... whoever?
Annette - I agree someone should go to jail, starting with the elected officials who voted for the Community Redevelopment Act (the major cause of the mortgage meltdown) and the Congressmen who testified that FNMA and Freddie Mac were in "great shape" even as defaults were stacking up like cord wood and the chairman of FNMA was getting a $10M bonus. It's easy to point a finger at the bankers, and many of them should share the guilt, but at some point you have to hold the parents accountable for the actions of the child.
1 vote Thank Flag Link Mon Jul 25, 2011
If an industry is not doing well the government will step in and take it over.
If an industry is doing well the government will tax it.
And what we think is a thing of the past.
Web Reference:
1 vote Thank Flag Link Mon Jul 25, 2011
The question is too late. Both fed and state governments are imbedded in the real estate market to such an extent they are very capable of fueling the rise or plundering the spoils. Too often attempt both, simultaneously.

Take away FHA, tax credits, foreclosure laws and distressed home programs and imagine where we would be.
I think until the bankers go to jail there will never be a fair deal for the homeowner or home buyer. HINT: when you say government be fully aware you are saying...BANKS.
1 vote Thank Flag Link Mon Jul 25, 2011
The Federal Reserve Bank of San Francisco opened up a several-hundred-million dollar bundle of mortgages, and found that something like 40% did not meet the funder's own underwriting standards. Incredibly smart people with obtuse mathematical "proofs" convinced Wall Street analysts that quality didn't matter - with the proper incantation, the bad loans would be worth more than the good.

The fact is, we don't want to pay for government to do a good job. To keep up with Wall Street would require that the government hire investigators with PhDs in physics and math to keep up with the quants who are busy converting lead into gold.

In a similar vein, it was recently reported that the processed-food industry spends $40,000 million (forty billion) on advertising their adulterated food products, and the Department of Agriculture spends $13 million promoting healthy eating to the public.

Sure, government should be involved with the real estate market. On behalf of the consumer, the citizen, the party with the least amount of knowledge in need of the greatest assistance.

Free-market theology is a fine and wonderful thing, but pragmatically, faith doesn't solve enough problems in the real world.
0 votes Thank Flag Link Mon Jul 25, 2011
Well said, Ron. I agree with you that from a legal standpoint we do need the government to be involved for our protection, and feel your rephrase as to the amount of involvement is a more adequate question here.
0 votes Thank Flag Link Mon Jul 25, 2011
Only to the point where they are protecting consumers. Many of the changes in the past few years are limiting and costly to consumers who now have less choices and more fees when applying for loans. I'm a believer that the market will correct itself without government involvement and may have done so much sooner had there not been as much. It may have hurt more initially but the bounceback would have been sooner.
0 votes Thank Flag Link Mon Jul 25, 2011
The government should only be involved by protecting consumers, not in the real estate market themselves. If there were protections in place when subprime loans were being sold to buyers with good credit, we'd be in a very different place now. We can't just have the free market dictate building laws either. No one likes fees and taxes, but other countries pay FAR more than we do.

To help consumers get in the real estate market, we do have government backed loans, like VA and FHA, and now we have the government trying to keep homeowners in their homes, despite opposition from conservatives.

The bottom line, the government should be protecting people by overseeing market practices.
0 votes Thank Flag Link Mon Jul 25, 2011

You are on the mark....during these times, doesn't accountability appear to be endangered at the expense of the taxpayers?

0 votes Thank Flag Link Mon Jul 25, 2011
I love the answers here. It is really an interesting question, because of the diversity of the opinions. Look at this story, just out this morning: What do you think?
0 votes Thank Flag Link Mon Jul 25, 2011
Very little. A prime example is the EPA lead based paint rules for homes built before 1976. This would have reduced the value of the homes built before 1976 by at least 25% and would result in entire neighborhoods becoming ghettos because of the extensive repairs needed to abate the issue. At least congress has the wisdom to say if you won’t change your rule then we just won’t fund your program effectively killing the deal. Financial example: I bought my 1st brand new starter home in 1990 for 60k, single family lot 3bdr, 1 bath, 2 car garage, basement & 1000 finished sq. ft. Today the same new home is 150,000 20 years later. What’s changed: The cost to develop land due to city, state and federal guidelines approx. 15 -20k, permit cost 1990 575.00 today upwards to 8,000, changes to the IRC codes 12k, changes to city and HOA minimum sq. ft. requirements for home size to 1200 sq. ft. approx. 20k, special assessments and impact fees city issued up to 6k. When the housing boom happened the government got in on the deal collected more fees and taxes, burdened small business owners with more rules, more fees and less service. Most importantly put the American dream of home ownership out of reach for many great job!
0 votes Thank Flag Link Mon Jul 25, 2011
There are those that believe that the government is involved in too many things that it shouldn't be and doing a poor job on top of it. Case in point, who was overseeing (or should have been overseeing) banking loan practices that helped contribute to the present housing market meltdown?

Perhaps we would be best served with a government that did little......BUT what they did, was done well! It's time to move away from the paradyme of "if it ain't broke don't fix it" to one of "if it stinks consider taking the garbage out."


0 votes Thank Flag Link Mon Jul 25, 2011
For years we have had the mortgage interest deduction and FHA - both are government involvement in real estate. The state of California also gives the interest deduction and a renter credit - involvement in real estate. I do not think you will be seeing the government out of encouraging real estate any time soon.
0 votes Thank Flag Link Sun Jul 24, 2011
When you talk about GOVERNMENT and REAL ESTATE you come out with STATES RIGHTS!

The answer is absolutely NO!!!
0 votes Thank Flag Link Sun Jul 24, 2011
Well, let's see... the federal government is limited by the Constitution to do only certain things, and I can't find a reference in the Constitution that allows the feds to become involved in the real estate market, so I have to say no - they are not supposed to be involved in the real estate market.
History has shown, in the long term, that government involvement only harms the economy by stiffling market forces that would help it grow naturally.
0 votes Thank Flag Link Sun Jul 24, 2011
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