Suggestions for Market Improvement

This post is the last in a series of three detailing the current state of the real estate market in Leon County. Please refer to the posts from 9/11 and 9/13 for background information.

I mentioned yesterday that I would give some suggestions on how to improve the state of the market. You will recall that I advocated an approach which targets both supply and demand. While I am thinking of Tallahassee in particular, these suggestions will work for any market struggling with oversupply.

My suggestions (most of which have already been offered in some form or another) are as follows:

1. Create another round of tax credits which are scaled back over time as the market improves (e.g. $4000 until the end of 2010, then $3000 from 1/11 to 6/11, then $2000 from 7/11 to 12/11, and so forth).

2. Create tax deductions which are scaled over time to provide a long lasting effect for purchasers while minimizing the up front cost to the federal government.

3. Open up tax credits and/or deductions to investors. This has a multiplicative effect because most investors are able to purchase more than one property, whereas a homeowner is by definition limited to one property (the one he occupies as his primary residence).

4. Provide funds to purchase and demolish the least expensive and most dilapidated homes in the market. This has an immediate impact on supply because it removes the property from the housing stock permanently, and therefore truly reduces inventory (whereas an investor might purchase and remodel the property and then place it back into the marketplace for rent or sale, thus having no effect on reducing the inventory).

5. Provide subsidies to builders to remodel dilapidated homes instead of building new ones. This has the effect of reducing inventory because builders are moved from the new construction market to the renovation market where they are rehabilitating the existing housing stock (good in its own right) instead of adding to it (which, in effect, reduces inventory, or at least prevents the inventory from growing).

There are other ideas for improving our local and national real estate markets, so if you'd like to discourse more on the topic, please comment on this post or email me at jasonpicht@gmail.com.