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2013 Thanks to Obama, A Forecasterís Rubik Cube ^ | December 21, 2012 | Fritz Pfister

Posted on 12/21/2012 10:52:52 AM PST by Kaslin

The formula for forecasting home sales used to include four key components; supply, demand, interest rates, and available mortgage money. With the election of Obama and his progressive onslaught upon the private sector, it becomes practically impossible to see 2013.

Ad nausea you have been told that businesses don’t like uncertainty as the primary reason they aren’t hiring. That is true.

Good news, businesses have certainty now that Obama has been reelected, they know for certain their taxes won’t be going down. They know Obamacare with its $1 trillion in new taxes will go forward.

The bad news is the fiscal cliff charade will keep small business owners guessing how high taxes will go on their incomes, dividends, and capital gains. But not for long, Boehner unable to muster up any integrity to stand on principle has caved on tax increases, and folded on meaningful spending cuts.

We are to the point that going over the fiscal cliff might be the better solution in the long term. Sure every economist says that will throw America into recession, but for how long?

If Obama is correct that we have a revenue problem, and not a spending problem, then doesn’t it make sense to just raise taxes on everyone now instead of delaying the inevitable?

Obama campaigned on a balanced approach, $800 billion in tax increases on the top 2% over ten years as the magic elixir that would pay for $1.3 trillion in deficit spending while paying for every entitlement in place or to be conjured up for infinity. No starving children, freezing seniors, dirty water, or air would result if Obama could just tax the rich.

As for spending cuts, all we needed was to gut the military, since he had already won the war on terror by defeating al Qaeda with the assassination of Osama bin Laden, was winding down the two illegal unfunded wars, and world peace had returned.

Sadly that plan changed as soon as the votes were counted. Obama now demanded $1.6 trillion in tax increases on the rich, while we would need to talk about spending cuts later. Just like under Reagan and Bush I which never came.

Instead of Boehner and Republicans leading by taking a stand on a solid fiscal policy that would actually help the nation recover, they drop their principles faster than Holder drops a case against New Black Panthers. Conservative principles such as real spending and tax cuts that always lead to recovery.

In order to make reasonably close predictions for the 2013 housing market, one must wait to see the final Obama tax and spend fiscal cliff solution. Will it simply be bad, or devastating? We’ll know soon.

Meanwhile back in the real world November housing starts came in below projections at 861,000 as October and September rosy numbers printed for reelection purposes, were revised down by 25,000. The economic ignoramuses in the media continue to report a housing recovery based on these numbers albeit 1.2 million starts is considered ‘normal’.

Building permit applications, the way local governing bodies collect fees on what might be built, came in at 899,000. Surprisingly permits were down 25% in the Northeast in spite of Sandy’s catastrophic toll on housing. Perhaps those will come later.

Good news for the real estate industry, there is certainty that the heavy handed state control regulatory regimen of Dodd-Frank will continue with Obama in office.

The bad news is the law mandates the Qualified Mortgage Rule (QM) be in place by January 1, 2013 along with the Qualified Mortgage Residential Rule (QRM). The QM is a bureaucrat definition of a one size fits all qualified mortgage that every potential home buyer must fit or be disqualified, while the QRM is a bureaucrat determination of the amount of risk every lender must retain for every mortgage they write.

As this column is being written on December 20th, those rules have not been released according to a source at Wells Fargo. My source says it’s no big deal because lenders have learned to adapt to the new rules coming across their fax machine daily, however it might prove to be a big deal to a buyer with a loan in progress if they don’t fit in the QM box.

The QRM simply means banks will only take risks on the highly qualified if they must retain a portion of the risk in the event of default. That’s easy for the forecaster, fewer loans will be approved.

It appears that the forecast for 2013 will have to wait until the final fiscal cliff charade is solved, and the bureaucratic geniuses release QM/QRM to calculate the damage to the housing market. For now 2013 is a Rubik Cube with missing pieces.

The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.

TOPICS: Business/Economy; Editorial

1 posted on 12/21/2012 10:52:57 AM PST by Kaslin
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To: Kaslin
I just looked up QRM. I found this:

What are the Proposed Standards for a QRM? The draft proposal issued by the federal government would set strict standards for borrowers. To qualify for QRM status borrowers must:

1. contribute at least a 20 percent down payment
2. pay closing costs out-of-pocket
3. provide full documentation of income with strict debt-to-income ratio limitations
4. be current on all existing debt payments
5. not have been more than 60 days delinquent on ANY debt obligation for the prior 24 months
6. not have had any property repossessed within the past 36 months
7. not have been a party to a bankruptcy proceeding, foreclosure, a short-sale, or a deed-in-lieu of foreclosure, within the prior 36 months
8. not have been subject to a Federal or state judgment for collection of any unpaid debt

How will QRM Impact the Availability of Mortgages and Mortgage Products?

Because the proposed QRM regulations will impose higher down payment requirements (20 percent), will exclude closing costs from financing and will impose strict limitations on fees and debt-to-income ratios, QRM will likely have a pronounced impact on the availability of mortgages. In fact, a recent study issued by the Federal Housing Finance Agency noted that under the proposed standards only 30 percent of mortgages issued in 2009 would meet the new standards. Thus, if enacted as drafted, the proposed QRM standard will limit the pool of potential buyers which in turn will further depress the housing market.

I don't know how much this was actually signed into law, but if the impact is as this last paragraph says, it will effectively kill the housing market as we know it.

I will admit that the rules seem logical and sensible enough, but is anything coming out of the federal government ever logical and sensible? Usually when these kinds of laws are passed, these days, it is done with a sinister motive. I do not trust the current regime in the WH, especially anything with Dodd's name on it, and that has the signature of the current occupier in chief in the WH.

2 posted on 12/21/2012 11:36:03 AM PST by ducttape45
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