The election is getting close. Both candidates are offering enticements in an attempt to out give the other and secure your vote. Too bad, none of the proposals presented actually address the issues going forward with respect to real estate. They only acknowledge what previously transpired, no solutions for ongoing future prosperity.

The problem used to be the rising cost of gasoline. As we fill our tank and drive 70mph down the freeway, that issue is in the rear view mirror. The number one issue these days is:

How do we solve the continuing problem of declining real estate markets and stabilize home prices?

Real estate being a tangible asset touches many people’s lives. People just get it. They may not understand why the stock market dropped 700 points today, but they can drive through the neighborhood visiting open houses and get a good idea of the value of their home.

Bring Tax Incentives Back

Someone should tell me why you have to pay a capital gains tax on the sale of your home if your are fortunate enough to exceed the $250,000 and $500,000 limits, but if you bought when the market was high and sold at a loss, you are not allowed a deduction? Uncle Sam just grins and says “tough luck”.

To fix the American economy, we have to address the issues at home first. Yes I mean our homes. Our leaders can continue to throw money at Wall St., and prop up the next failing institution, but until they address AnyStreet, USA the problems will persist. If it were up to me, I would immediately implement the following:

1. Bring Back Accelerated Depreciation – this was taken away from real estate investors with the Tax Reform Act of 1986 which increased the number of years a residential property could be depreciated from 15 to 27.5.
2. End Depreciation Recapture – when an income property is sold, the depreciation that was taken in every tax year has to be added back as income to the sale of the property. Modifying or ending these two provisions would encourage individual investors to acquire property. The other issue we have with Pasadena real estate is prices are still relatively high enough to discourage investment unless you have a 40 to 50% down payment. Addressing the depreciation issue will encourage many would be investors by making it more financially feasible to own rental property.
3. Allow Homeowner’s to declare a loss on a principal residence by offsetting other income.
4. Access to retirement accounts – as we watch more of our retirement funds evaporate in the stock market, why shouldn’t we be allowed to have access to our money for investment in other vehicles? Senator Obama has now proposed access up to $10,000, which is far short of addressing the real problem. Senator McCain’s program struck me as lackluster as well.

You have to provide people with an opportunity to make a difference. Government will not pull our economy out of the tank, individuals and businesses will. Well intentioned government programs only serve to tie our hands behind our back. Conventional does not work anymore. Its time we had meaningful incentives to get our economy back on track.