Jump-Starting the Real Estate Market

Well the U.S. Congress has passed the Obama "stimulus" package at last. While we can debate the merits of this legislation and whether it is a stimulus or a spending package, we all are hopeful that it will help our bedraggled economy.
The bill included a bone for new home buyers. The tax credit for first time home buyers was increased from $7500 to $8000 with the following great changes:
1) the credit does not ever have to be re-paid (unless home sold within first 3 years)
2) the tax credit is retroactive for all purchases that closed or will close escrow in 2009.
3) There are income limits ($75,000 for single owners and $140,000 for married)
Although this is another great stimulus for the entry level of the market, it unfortunately won't help the middle or upper price tiers.
What's needed for these market segments (and the entire real estate market) is free-flowing capital at rates that are a real incentive to purchase. I'm talking 5% (or lower) fixed-rate, 30 year mortgages that are available to every qualified buyer who has some reasonable down payment. I am not a fan of the re-structuring of existing mortgages, especially when the principal is changed (aka "cram down" restructuring), because in many, if not most, of these re-structurings the qualifications of the borrower are not sufficiently examined. It is NOT enough to keep existing borrowers in their homes. If borrowers cannot qualify for their existing loans nor any loan even remotely close to the terms of their present loan, then unfortunately these people will likely have to lose their homes. It calls to question whether they ever should have been given loans (or loans of that magnitude) in the first place.
The second item that should be required for ALL buyers regardless of price point is that they must have some reasonable down-payment. Without "skin in the game" there is no incentive for an owner to maintain a property or stick it out through good and bad times. An absolute minimum should be 5 % of the purchase price. This is not excessive historically and makes good business sense.
The recent surge in home sales in the entry level of the market testifies to the existence of ready, willing and hopefully able buyers in the market. I believe similar pent-up demand exists through out the entire real estate market. If loan rates were rolled back across the entire home loan spectrum to the levels we are seeing in the entry segment (5% approximately), I bet there would be a similar surge in sales at all price ranges. Until the government (Federal and State) supports the housing market by making affordable, market-stimulating loans (including refinances) available across all price points, we are in for slow, and likely unsteady, progress out of the significant inventories of unsold homes.