Tiered Real Estate Blog – Reality in Realty

Recently there has been a lot of talk about ways to save the economy by giving money directly to Americans. It is a very intriguing discussion that has many possibilities. By giving money directly to Americans it removes the control that the government would have over the money or business who receive the money. It could be used for fixing a home’s financial situation. It could be used for investing. It could be gambled away at a casino or spent on drugs. There is no way that the government can know how it will be used. Most of the time, it will impact where needed and it most definitely will get money flowing in our economy.

If most homeowners used it to pay down debt, creditors would have a huge influx of cash. Mortgage companies could see billions of dollars hit their books while finding mortgages brought back into good standing. In addition, this flow of capital will make banks and other creditors more willing to offer loans again. First time home buyers will have down payment money. Economically stable families will have investment and vacation money. Spending will increase. Hiring will increase to fill the demand placed on our increasing consumption. Some potential retirees will get enough money to leave the workforce and create jobs for younger workers. The economy will start moving and it should start moving in a very short period of time.

What about the down side? The US government says that there are about 116 million households in the U.S. If every household was given $25,000 it would cost almost $3 trillion. Wow! A staggering cost. In addition, what happens with inflation and the value of our currency if the government passed out $3 trillion? It would be rough.

There are ways to reduce the cost. Offer the money to those who file income taxes and limit it to U.S. citizens. Only offer the money if your household income is under $250,000.

Another option is to offer the money to individuals instead of households. If the amount was $10,000 it could still cost $3 trillion if everyone received their money. However it would give more money to families who are larger and need more money and less to those who are smaller and need less money. Again, limiting to U.S. citizens and tax payers would reduce the overall cost.

A third option is to restructure the housing market and let the trickle-down work from there. Under one option, all loans would be reset to 4.5%. This would reward those who do pay their loans and save from foreclosure those who don’t while still putting money in the pockets of banks and largely eliminating the number of foreclosures. An alternate plan involves putting together local teams of real estate agents and appraisers who make independent valuations on homes. Then they work with the assessor and the banks to correct the amount of the loan and the taxes. The shortfall could then be made up by the federal government in one of their ‘bailout’ packages.

What do you think? This is an important topic that affects every one of us and will shape our economy for the foreseeable future. Post your opinions, ideas, suggestions and comments.