Markets are governed by the laws of supply and demand. We have learned that in school, read it in the newspapers, and experienced it in real life. The problem with the housing market today, we know, is not a lack of supply. There are plenty of homes available. The problem is on the demand side.

In housing, the demand side has two components. First of all, there must be willing and able buyers. But, for there to be able buyers, there must also be financing available. So far, the primary focus of government efforts has been on the financing component. Billions of dollars have been and will be spent on shoring up banks and institutions such as Fannie Mae and Freddie Mac, all in an effort to get credit flowing into mortgage markets again. To date, the success of these efforts has been only marginal. Partly it is because of a continuing reluctance to lend, but also it is because potential buyers are still somewhat reluctant to buy.

Recently, Congressman Ken Calvert (R Calif.) addressed these issues when speaking to a group meeting under the auspices of the National Association of Realtors® (NAR). This 2009 NAR Issues Conference was held in San Diego, California. The attendees were self-professed Realtor® “political junkies”, all of whom understand how closely their business is tied to decisions made in Washington, D.C.

Congressman Calvert suggested that the government needs to do more to create demand in the housing market. It can do that by increasing the attention that is paid to consumers – the potential buyers of homes.

The administration has already put in place an $8,000 tax credit for home buyers, but it has restrictions. It is only available to individuals who make no more than $75,000 or couples earning no more than $150,000. The credit is for $8,000 or 10% of the purchase price, whichever is less. It can only be used by first-time homebuyers (defined as one who has not owned a home for at least three years.) Unlike an earlier tax credit plan, it does not have to be repaid.

But why, it was asked at the conference, should the tax credit be restricted to first-time homeowners, owner occupants, or even to a single purchase? And why should it only be available to those below a certain income level? If the aim is to stimulate the housing market, why not make it available to anyone who purchases a home? Moreover, why restrict the number of credits available to any one purchaser? If someone buys two homes, let them have double the tax credit.

The congressman noted that some would object to such a proposal because it could be used by investors who were buying rental housing. To which the proper response should be, SO WHAT? Would it be a bad thing to have more rental housing available (which, of course, would help to bring down rental rates)? Or would it be better to have these homes continue to languish on the market as bank-owned properties and short sales?

Suppose, just suppose, that a $15,000 tax credit were available to anyone who purchases a home, and for every home purchased. That incentive should increase demand. And suppose, just suppose, that it so increased demand that it resulted in 1 million more homes being sold in 2009 than in 2008. That would be significant (though still behind the 6.4 million units pace of 2006). It would cost the government in lost taxes or refunds about $15 billion. Is that excessive?

First of all, $15 billion is chump change in relation to the amount of money that has been and will be lavished on big banks and Wall Street financial firms. Secondly, unlike most of what we have seen, every dollar spent would be directly tied to accomplishing the aims of the program. None of them would go to bonuses. Tax credits would only be given if homes were purchased. Moreover, if the plan were not successful, if it didn’t stimulate sales at all, then it wouldn’t have cost anything. How is that for novelty among government programs?

Stimulate the market by increasing demand. Use a program that only spends money if it works. Make it available to everyone. Pretty radical ideas. Maybe that Congressman is on to something.

B. Hunt

The annual homeowner association meeting convenes. The president announces that the floor is open for nominations. A fellow homeowner say to you, “You know, you would make a good board member.” Before you have a chance to reply, some body movement indicates that you are willing, ready and able to serve. “The nominations are closed,” a vote is taken, and suddenly YOU ARE ON THE BOARD OF DIRECTORS. You ask yourself, “What does being on the board mean, who is going to teach me and how much do I get paid?” Here are some basic guidelines on how to become a successful board member and enjoy it at the same time…a lesson in HOA responsibilities and practices.

What does it mean to be on the board? You have made a commitment that you will serve the HOA’s interests to the best of your ability, be fair on matters that come before the board, will do your best to preserve and enhance the values of the common areas and that you will spend money in a prudent manner. Being a director also means that you have fiduciary duties which require making reasonable investigation into matters dealt with and acting in a businesslike, prudent manner when making decisions.

Who is going to teach you? Hopefully, you have several veterans on the board who will help you. Ideally, you will have the property manager who works closely with the board and is willing to offer guidance. Continuity is one of a board’s greatest challenges. Ask questions. How have issues been handled in the past? Current boards should carefully consider plans laid by previous boards and not change them impulsively. Take time to become familiar with your association grounds and facilities. Review the HOA’s governing documents, the rules and regulations, and any other board policies to develop a familiarity with them. Keep a set handy for when specific questions arise.

Make a commitment to attend all board meetings and prepare in advance by studying the agenda and related material. There generally aren’t (or shouldn’t be) many meetings but each deals with critical issues. Give them your full attention.

Budget time offers an opportunity to help build a sound financial future for the community. The two basic parts of the budget are Operating (deals with routine maintenance and day to day expenses) and Reserves (long range, major repairs and replacements). As a member of the board, you will be asked to predict future financial needs by using both past budget history and new information accumulated for future repairs.

How much does the job pay? While no money is paid, there are many personal rewards to be had for a job well done. Dealing with people requires patience and flexibility. Remember that while disagreement is not always avoidable, you were elected to make decisions. Consider carefully those decisions put before you and do your best. If you serve as a committed member, it will be one of the more rewarding experiences that you will have.

R. Thompson

McLEAN, VA — Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.80 percent with an average 0.7 point for the week ending April 23, 2009, down from last week when it averaged 4.82 percent. Last year at this time, the 30-year FRM averaged 6.03 percent.

The 15-year FRM this week averaged 4.48 percent with an average 0.7 point, unchanged from last week. A year ago at this time, the 15-year FRM averaged 5.62 percent. This is tied with last week for the lowest the 15-year FRM has been since Freddie Mac began tracking it in August 1991.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.85 percent this week, with an average 06 point, down from last week when it averaged 4.88 percent. A year ago, the 5-year ARM averaged 5.68 percent. This is the lowest the 5-year ARM has been since Freddie Mac began tracking it in January 2005.

One-year Treasury-indexed ARMs averaged 4.82 percent this week with an average 0.4 point, down from last week when it averaged 4.91 percent. At this time last year, the 1-year ARM averaged 5.29 percent.

“Although long-term mortgage rates eased slightly this week, ARM rates remain elevated relative to those fixed-rate mortgages,” said Frank Nothaft, Freddie Mac vice president and chief economist. “For instance, interest rates for 1-year ARMs exceeded those for 30-year fixed-rate mortgages over the last two weeks; this is the first time this has happened since Freddie Mac began collecting data for ARMs in January 1984.”

“The housing market is showing further signs of possible improvement. House prices rose for the second consecutive month in February, the first back-to-back increase since April 2007, according to the Federal Housing Finance Agency. Among the nine Census divisions, six experienced positive gains in February, led by a monthly increase of 3.8 percent in the Pacific Division.”

Investors looking to acquire houses through short sales just might be in for some good news.

One of the largest holders of second liens in the U.S., the Bank of America, says it’s relaxing its policy on payoffs connected with short sales.

That’s important because large banks have been major impediments standing in the way of thousands of short sales, demanding money for home equity lines and second mortgages that would otherwise be worthless if the short sale property went to foreclosure.

Bank of America had been among the least cooperative of all banks in agreeing to short sale payoff terms, according to industry critics.

The company’s policy was blunt: Pay us 10 percent of what the homeowners owed on the equity line balance or second mortgage, or we won’t sign off on the short sale, which is necessary for the deal to go through.

Now the bank has adopted what spokesman Terry Francisco told Realty Times is “a less arbitrary, more rational” policy.

“What we’re saying (to short sale proposals) is — give us an opportunity to participate and gain at least some of the savings” that will go to the first lien holder — the primary lender on the property — by avoiding the high expenses and losses of a foreclosure, according to Francisco.

Bank of America is now asking for five percent of the sale proceeds on the short sale, net of realty commissions, closing and other costs.

The bank believes that should open the door to more successful transactions, as well as more fruitful negotiations with buyers and sellers to avoid foreclosures.

But not all short sale market experts are convinced that’s the case. Raffi Tal, CEO of Los Angeles-based I-Short Sale, Inc., one of the largest players in the field, says Bank of America’s new policy “will still jeopardize” many short sales that involve its second liens.

The bank’s previous 10 percent policy meant they’d demand $20,000 on a $200, 000 equity line balance, or they wouldn’t bless the deal. But their new policy still means “they want $15,000 if the net proceeds are $300,000″ on a short sale, Tal told Realty Times — even though the economic value of their holding may in fact be zero.

Bottom line for investors: If there’s a Bank of America second mortgage or credit line on the house you’re after in a short sale, work the new numbers. At least some of the time you might be surprised that the answer from the big bank is now ‘yes.’

And watch for other major banks to follow suit.

K. Harney