COMMENTARY | They say there is no rest for the weary, and that seems especially appropriate for our nation's elected officials.
Election Day may still be fresh in our rearview mirror, but in case you have forgotten, the lame-duck session of Congress begins Monday. And they will have little time to celebrate or lick their wounds because the economy is under a very real threat.
The media has dubbed it the "Fiscal Cliff." This cliff, which is a series of automatic tax increases and spending cuts set to be enacted on Dec. 31, could drive the economy back into a recession, according to a new Congressional Budget Office report.
Here's the problem: For people like myself on the front lines of the real estate market, the fiscal cliff is not some imminent threat -- it's already here.
When it is all said and done, D.C.'s landscape is almost identical to what it was before Tuesday, and the very same problems that were ignored during the election are now staring us right back in the face.
Let's be real -- Thelma and Louise are inches away from driving over the edge of the Grand Canyon. That is where we are right now with the housing market. I am not trying to scare anyone, but for those of us on the front lines of the housing crisis, there are some real troubling signs.
There have been many cautious signs of improvement in real estate over the last few months, and on paper the housing market is starting to stabilize.
But if you think we are out of the woods, then you have not been down in the trenches like I have. Some of the gains I have seen over the last year are already starting to evaporate.
Here in Florida I have seen an increase in the number of bankruptcy filings yet a decrease in the amount of homes being put up for sale.
Even though home prices are on the rise, inventory here in Florida remains tight. Among real estate professionals, there is a tremendous amount of anxiety.
Why? It all goes back to that pesky fiscal cliff. Both President Barack Obama and the party leaders were knee-deep in their campaigns during the last year, but all the while there were problems that desperately needed to be addressed.
And guess what? They are still there. Mortgage brokers, real estate agents, and of course buyers -- none of them really know what Congress is going to do about housing.
Here is the No. 1 threat to all the gains that the real estate market has made in the last year, and it is one of those looming tax increases that is part of the fiscal cliff: It is the Mortgage Forgiveness Debt Relief Act of 2007, which was one of former President George W. Bush's parting gifts. It was passed during another lame-duck session, and it is set to expire as the ball drops in Times Square on New Year's Eve. It applies when a homeowner performs a short sale on their primary residence.
Loan forgiveness was one of the factors that made short sales so appealing for my clients, and it is why folks in the real estate industry were starting to see improvement.
The banks finally caught on to the benefits of short sales, so much so that their pre-foreclosure sales, which often include short sales, were at a three-year high during the first quarter of 2012. In fact they outnumbered foreclosure sales in 12 states during that time.
But that trend has already started to reverse itself, with pre-foreclosure sales dropping 10 percent from the last quarter, and dropping 9 percent from the second quarter of 2011. Locally short sales accounted for 50 to 60 percent of the real estate market, but that has come to a crashing halt.
Even if the Debt Relief Act is ultimately extended, there will be a noticeable effect on the real estate market based on everything I have seen in the last few weeks.
In March my phones were ringing off the hooks with nervous sellers seeking to complete a short sale before the end of this year. Now the calls have stopped coming.
The reality is that short sales have never been short to complete. In reality they take months, and with the pending uncertainty that remains, no one is willing to take the risk of starting the process now, and why would they?
It is an absolute no-brainer for Congress to extend the Debt Relief Act, yet some reports have its renewal odds at 60-40 in favor of an extension.
Not exactly overwhelming odds. If we are to believe any of the post-election talk from D.C. about ending the partisan bickering, here is a perfect opportunity for them to prove it by extending this important tax break.
The effects of Congress failing to do so will reach far beyond short sales, far beyond real estate. Construction starts are just beginning to rise. Builders are buying land again, and lumber companies are getting back into business. All of that could potentially be undone.
Lest we not forget real estate is the engine that drives our economy, and lately short sales have been driving the real estate market. So if they collapse, it is not unimaginable that the Gross National Product could lose an entire point.
So if there is any hope of stopping Thelma and Louise from taking the economy with them as they go over the fiscal cliff, Congress must renew the Debt Relief Act when they head back to work on Monday.
From Wall Street to Main Street, real estate attorney Roy Oppenheim is the co-founder of Oppenheim Law in Fort Lauderdale, Florida, and Weston Title. He is also creator of the South Florida Law Blog, where he comments on housing from the trenches of the foreclosure crisis .
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