Real estate is the corner stone of our economy. A recovery of the real estate sector has always brought us out of past recessions. This one will be no different.

We know a big surplus of vacant houses has existed on the market for years. Much of this is caused by the foreclosure catastrophe. If nothing changes, we will eventually work through the glut and return to normal in several more years. But do we really want to continue in a very slow recovery for years to come?

The government has made several unsuccessful attempts to reduce foreclosures and thereby stimulate the economic recovery. All of us are aware of the government’s Making Home Affordable Program and spinoffs like Home Affordable Modification Program. No single program or combination of programs has made a noticeable improvement in the recovery of the residential real estate sector.

Some expert’s have advocated the government intervene to force a reduction of mortgage principles so that homeowners can refinance at today’s lower mortgage rates. While this may be a viable option, it would come at another heavy expense to taxpayers.

A better solution is establishing tax incentives for investors like you and I to buy up the glut of houses and either turn them into rental properties or sell them on the open market for market value.

There are several advantages to putting an investing incentive in place. Foremost, only after the surplus dries up will the market return to normal and housing values begin appreciating again. When that happens, homeowners and investors alike will be able to refinance or again sell properties at a profit.

This is a much less expensive alternative to taxpayers. Congress should enact an investment incentive allowing investors to immediately depreciate the value of properties instead of requiring it be done over multiple years. Although I don’t favor controls on investors, if the government enacts this incentive, it is also likely to require the property be held for a period of time that could be several years in length.

Overall, increased immediate depreciation would have the compound affect needed for a rapid real estate recovery. The tax savings for investors would make more investing funds available. These funds would be plowed back into the real estate market to further reduce the excess inventory. Reducing the inventory takes pressure off the lenders’ balance sheets when the FDIC reduces the amount of reserves lenders are required to hold in anticipation the loans will not be repaid.

Lower reserves make more money available for lenders to loan out. This in turn, makes it easier for people to buy homes. Reduced inventory means supply and demand are brought back into balance. Real estate prices will begin to rise again. When owners again have equity in their houses, they can refinance at the low interest rates, thus lowering their monthly payments. More affordable payments will lower the foreclosure rate.

There is a pent up demand for rental housing that works in the favor of investors. Young people in particular are room mating when they would rather have their own place. Young families are living with parents when they should be on their own. This pent up demand will absorb rental housing when investor incentives allow positive cash flow at a lower rent price.

Reduced inventory, increasing real estate prices, and increased demand will bring on new construction. Exactly what has occurred to stimulate the economy to end past recessions.