The “American Recovery and Reinvestment Act of 2009 (ARRA)” passed the House on February 13, 2009 by a vote of 246 – 184. Later that day, the Senate also passed the bill by a vote of 60 - 38. President Barack Obama signed the bill on February 17, 2009. The bill is a $780 billion stimulus package, with roughly 35% of the package devoted to tax cuts and the rest is for the anticipated projects intended to occur in the later months of 2009 and 2010.

The bill includes the following provisions that will greatly affect the Real Estate Market:

Homebuyer Tax Credit – The bill provides for $8,000 tax credit to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.  The credit does not require repayment.  Most of the mechanics of the credit is the same as under the 2008 rule:  the credit will be claimed on a tax return to reduce the purchaser’s income tax liability.  If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year’s 2008 loan limits for FHA, Freddie Mac and Fannie Mae loans.  These limits were equal to 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie with an overall maximum cap of  $729,750.  For the few areas where the 2009 limits were higher, the higher limits will apply.  In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area” or an area smaller than a county. The Secretary’s discretion is again limited by the $729,750 cap. These 2009 limits will expire on December 31, 2009.

The inclusion of these loan limit provisions in the final bill is a victory for homeowners, buyers and Realtors.  While these new limits were included in version of the original stimulus bill approved by the House, the bill first approved by the Senate did not.  National Association of Realtors Call for Action to both the House and the Senate prior to the final vote advocated strongly for the provisions which were then included in the final bill approved by both Chambers.

In the face of an economic crisis, the magnitude of which we have not seen since the Great Depression, the American Recovery and Reinvestment Act (ARRA) represents a strategic and significant investment in the US. ARRA will do more than provide short-term stimulus, it will lay the foundation for a robust and sustainable 21^st century economy.

Though 2009 is a time of painful economic climate of shrinking investments, credit crisis, a recession and a time when economists are still expecting another downcast year for housing. There is still a silver of positive news and a number of hopes to cling to. These are optimistic factors that might be enough to spring housing back to life in 2009 and could—with a few lucky breaks—prevent the real estate market from declining as sharply as it otherwise might.

Here are the three best reasons to be hopeful about housing in 2009:

1. Cheap Mortgage Rates

It was not too long ago that mortgage rates were expected to move sharply higher but a number of recent developments have combined to create a decidedly optimistic mortgage-rate outlook for 2009. The factors that would typically operate on mortgage rates are the economic backdrop, the inflation backdrop and government housing policies which are all pointing towards lower interest rates for this year.

2. Lower Housing Prices

House prices at global level have already fallen to 21 percent especially in the US and could drop further to 25% by late 2009 according to economic analysts. Lower housing prices help stimulate buyer demand and are needed to mop up housing inventory. As a matter of fact values in certain markets are already at low levels enough to tempt bargain hunters. “Falling home prices are not part of the problem that slumps the real estate market, they are part of the solution” said Mike Larson, a real estate analyst.

3. Rents are falling fast too!

Though it is difficult to quantify the state of the rental market, rents fell in almost every sector in the global real estate market. The steepest drop was 5.7% of the price that were set by landlords. Some people are even negotiating rents as much as 20% lower than the original prices. These figures also leave out incentives, like a month of free rent or the landlords can pay for the broker fee which can add up to real savings.