Suspend the Practice Of Flesh Devouring: Let The First Time Home Buyer Tax Credit Expire

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Mortgage and Lending with San Diego VA Home Loans/858-777-9751

zoPlease stop this zombie behavior.  Government doesn't create wealth, it devours it like a zombie devours all that is living.  Do you know what happens to zombies?  They devour everything living until there is nothing living anymore....then they die, too.

Government home buyer tax-credits are bribes.  They're bribes to get unwilling and unsophisticated home buyers to purchase assets which may be artificially inflated.  Haven't we learned enough from the mistakes of Government's social engineering in the mortgage markets?  The social engineering associated with the Community Reinvestment Act inflated a real estate bubble which popped and ruined families' opportunity to create a reliable nest-egg from equity in their homes.  It started off slowly and accelerated when expanded to encompass most any sub-prime loan.  The Government-provided backstop for losses encouraged market participants (banks and non-depository lenders) to make mortgage loans with complete disregard for the borrowers' abilites to repay those loans.  

madoffGovernment intervention to entice asset purchases creates a pyramid scheme which ultimately leaves someone holding the bag.  Like Bernard Madoff did with unsuspecting investors, the National Association of REALTORs attempts to start a new Ponzi scheme based upon a Government incentive.  Someone's gonna get left holding the bag for this scheme; most likely our children.

We are in the midst of the largest "right pricing correction" of our lifetimes.  The existing housing decline, driven by the failure of the unsustainable, poor lending practices (foreclosures) is healthy.  Free markets reward prudent use of leverage and punish the irresponsible.  Many people trusted mortgage consultants and real estate agents to advise them to eschew bad business practices and make prudent purchase decisions.  Instead, we nursed on the milky teat of a Government-sponsored Ponzi scheme destined to fail.

Fail is what the extended tax credit will do.  The initial first-time home buyer tax credit was an interest-free, loan from the US Treasury.  While still immoral, it provided for the repayment of that loan to the Treasury.  We descended down the slippery slope of "jump starts", expanded the size of the credit, and forgave the repayment of those "loans" with the sole purpose of giving the housing INDUSTRY, not housing market, a boost.

To request further Government assistance for our industry is deplorable.  We need a housing market that relies on the principles of supply and demand rather than some cheap, two-bit hustle.  More foreclosures are coming and that will be tragic for millions of American families.  One man's tragedy, however, is another man's opportunity.  If we, as real estate agents and loan originators are to support the principles of private property ownership, free markets, and real estate as a reliable vehicle to build long-term security, we MUST do what is moral, regardless if it won't allow us to line our pockets.

Please say, "No Zombies!  I won't allow you to devour my children's flesh" and encourage your elected reprsentatives to act like sober, prudent people...

...not zombie enablers.

PS:  If you're a first-time home buyer, by all means take the tax credit but make no mistake about it, this credit REALLY wasn't for you, it was for us, the zombies in the housing industry.

Why Devouring Flesh Is Morally Wrong (and how you can stop doing it)

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  1. Phil Caulfield 10/06/2009 11:21 AM
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Rainmaker
125,473
Susanne Novak, ABR, FIS, GRI
RE/MAX 24/7 - Columbus, OH

At least Brian is taking a stand and 100% behind it, not like some others who are turning with the wind ...

How about this: I have plenty of buyers who qualify for a loan, we make offers, go into contract, just to learn from the lender that the house does not qualify? We are not talking trashed out, burned out junkers. Just properties that need a little TLC like new carpet, light fixures, interior doors, a faucet etc. How come I have to get a structural engineer to look at just about every property we take into contract?

At this rate, with the current underwriting guidelines, it will take another decade to get the inventory off the market. My buyers could care less about the $8,000. All they want is a HOUSE to move into!

Sep 17, 2009 01:32 PM #129
Rainer
29,313
William Moore
Innovative Realty - Londonderry, NH

In the words of Winston Churchill:

"A government that tries to tax its way into prosperity is like a manstanding in a bucket and trying to lift it by the handle."

Someone will have to pay for the program.  Obviously, prior to the inception of the program, we didnt have the cash saved up for it, and it isn't suddenly materializing in front of us as we speak, so the only source for the tax credits is future taxation.  Sure, we might be able to delay having to pay up by borrowing from China, but that just delays the ultimate payment by 10, 20, 30 years.

Should we thank our children now?

Sep 17, 2009 01:49 PM #130
Rainmaker
310,387
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

At this rate, with the current underwriting guidelines, it will take another decade to get the inventory off the market

I completely agree, Susanne.  Here's why; the single-payer, gov't subsidized system for mortgages dissuades any private lender (who would analyze and price in the risk of a scratch and dent property) from offering a profitable product.

It won't surprise you, Susanne to learn that I am a fan of Austrian-Americans.

Sep 17, 2009 02:23 PM #131
Rainmaker
67,980
Sherry Laursen
Remax Premier Group - Tampa, FL
MAKING YOUR REAL ESTATE DREAMS A REALITY

I have to disagree with you on this. I think the tax credit has helped reduce the inventory and extending further will reduce it even more which is what we need, therefore stimulating the housing market. The housing market improves, its a start in improving other areas of the economy. A win-win situation. Also,  I haven't had any first time home buyer that has had to use the credit to purchase the home. They have been qualified buyers that just liked the incentive. I say extend it.

Sep 17, 2009 02:54 PM #132
Rainmaker
199,335
Mark Velasco
Sharpstone Realty, Inc - Whittier, CA
Listing Agent-Whittier & Surrounding ciities

Interesting argument Brian. It is giving me food for thought on this debate.

Sep 17, 2009 05:27 PM #133
Rainmaker
129,517
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

Interesting arguements.  I'm amazed that the majority still seem to be against it.

Sep 17, 2009 07:37 PM #134
Rainer
73,564
John J. Woods
Aardvark Appraisals - Palm Desert, CA

May sound cliche', but I couldn't agree with you more.

Sep 17, 2009 07:56 PM #135
Ambassador
603,058
Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

One unanticipated side effect of the credit is that purchases that would have been made in 2010 were accelerated into 2009.  Those natural sales will now be missing from 2010 - unless the government creates ANOTHER credit...

Sep 18, 2009 12:32 AM #137
Rainer
41,285
Carl Schumacher
CIDM Real Estate - Grand Rapids, MI

Jefferson Vice #123 . . .

Hear, Hear . . .

Sep 18, 2009 01:45 AM #138
Rainer
41,285
Carl Schumacher
CIDM Real Estate - Grand Rapids, MI

# 129 "Lord no!  We'd be living prosperously if the government stayed out of housing, for the past 80 years."

With all due respect Brian, if the government had stayed out of housing for the last 80 years, it's most certain that we'd all be paying rent to the company store and there'd be no real estate market for common middle class people to participate in. Not to mention a viable real estate market for us to practice in. This is like saying that if the government had stayed out of environmental regulations or zoning of any kind for the last 80 years we'd all be living in the garden of Eden. A little historical research by you into the history of why the government felt compelled to create HUD and FHA 80 years ago would go a long way toward tempering what appears to be a very naive and narrow POV on your part.

Carl Schumacher

Sep 18, 2009 01:58 AM #139
Rainer
41,285
Carl Schumacher
CIDM Real Estate - Grand Rapids, MI

I also happened to notice that in the title of your blog here you're claiming to be "America's Number 1 VA Home Loan Broker." Interesting ad for a guy that feels the government shouldn't be involved in housing. Last I knew, the VA lending program is a "government guaranteed" loan program. Based on your analogy then, I'm guessing you feel it should be eliminated because the government created it?

Just sayin' . . .

Carl Schumacher

Sep 18, 2009 02:09 AM #140
Rainmaker
270,656
Jim McCormack
Nashville Short Sale Specialist - Jim McCormack - Edge Advantage Realty, LLC - 615-784-EDGE (3343) - Murfreesboro, TN
Nashville Short Sale REALTOR - Stop Foreclosure

The government should focus on the economy, not housing.  The fundamental question is why have jobs been leaving the US for the last 3 decades?  Answer: taxes, government regulations (think environmental regulations that punish companies while doing nothing to help the economy such as CO2 emissions, etc., hiring quotas, employment laws, etc.) and labor unions.  Fix those problems and employment and income rises.  After several years maybe incomes will catch up enough and housing prices will fall enough that we actually reach a sustainable ratio of median home prices to median incomes (normally median home prices in an area are 3x incomes in that area) when overall employment is stable.  Right now we have increasing unemployment, increasing foreclosures, but government meddling.  This is causing confusion and chaos.  For those who think we can ride this out with a 1 year extension of the tax credit, etc., please look at the stats.  Foreclosures will remain at very high levels for 3-5 years and at high levels for several years beyond that.  Unemployment, will start to go down in about 12-18 months, but it will not go back down to the 4.5-5.5% levels of 2004-2005 because the economy (and the employment market) was so dependent on consumer spending and that spending will not come back since it was fueled and enabled by easily obtainable debt that is no longer available.

While this mess hurts me right now as a REALTOR and a homeowner who is trying to sell their home due a relocation, I know this is true.  Declining housing prices are good for the economy.  It will free up capital that can be spent and/or invested in other areas.  It will enable people to actually eventually own their own homes and live with less debt and stress instead of living on the absolute edge.  This is all just a deleveraging of the US economy, which IS NECESSARY.

Mark my words, eventually the government subsidizing of the real estate market will end and the housing market will decline more.

Sep 18, 2009 02:57 AM #141
Anonymous
Efrain Bobadilla

Thanks for the post Brian, you are so right, we are going back to the problem again, in my area $8000 is enough for Down and closing costs in 50% of the properties listed, that means that a lot of buyers are getting in to properties with no money down basically. at the first little hiccup they will let it go, and there we'll have another foreclosure again.

Sep 18, 2009 03:13 AM #142
Rainmaker
310,387
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Based on your analogy then, I'm guessing you feel it should be eliminated because the government created it?

The short answer is that I think all government involvement in housing should cease so that we can recover more quickly and develop a healthy mortgage market.  Here's the long answer.

With all due respect Brian, if the government had stayed out of housing for the last 80 years, it's most certain that we'd all be paying rent to the company store and there'd be no real estate market for common middle class people to participate in

That's what the high school social studies teachers taught the good little boys and girls, Carl. Unfortunately, I was one of those "bad" kids who wondered "What if unfettered capitalism were allowed to work?"

Why do technology companies have a high failure rate but the ones that succeed make enormous amounts of money while reducing time and costs (basically, bettering society).

HINT:  It's because the government hasn't found a way to regulate them...yet.

Gues what, folks?  Your high school studies teachers and NAR union reps are wrong- we don't need the government in housing.  In fact, we'd be much more prosperous without its interference

Sep 18, 2009 12:33 PM #143
Rainer
41,285
Carl Schumacher
CIDM Real Estate - Grand Rapids, MI

"I was one of those "bad" kids who wondered "What if unfettered capitalism were allowed to work?"

I'll put this as nicely as I can and still make my point:

If unfettered capitalism were allowed to work it is almost a certainty that you, your children, and your grand children (if you have any) would now be enjoying working at, living at, and receiving the few items you would be allowed to buy from either The JP Morgan corporation, Standard Oil, (The Rockefellers) or perhaps the Vanderbilt family. IOW's the US would have already disolved back into the feudal system that it fought a revolution to escape from. Two of these companies (do you know which two?) both at one point in their history wound up amassing more wealth than the entire US treasury. One of them actually had to lend money to the US government in the early 20th century in order to keep the nation from desoliving into capitalism chaos when the treasury came up a little short trying to maintain united order with the states.

"Unfettered capitalism" works extremely well for whomever eventually winds up at the top of the pyramid. Unfortunetly, it doesnt work for 99.99 & 9/10's of the rest of the population.

I'd suggest that you read Upton Sinclare's "The Jungle" for a lesson in how "unfettered capitalism" works out for the working class. Next, you might try getting through Howard Zinn's "A Peoples History of the United States." for a look at US history through the eyes of "rebels" (as you apparently feel that you are) that apparently your "high school social studies teacher" forgot to assign when you attended high school." A high school level class in economics might be helpful as well. You will learn why "regulated markets" are a requirement of a healthy capitalistic economic system in order to insure competition in otherwise "free" markets that in every circumstance known to man will eventually lead to economic chaos, revolution, death, and eventually collapse.

I find it interesting that the "right," (which I'm assuming you are based on the responses you've made to some of the comments posted here) seems to always have to eventually resort to hurling insults when they arrive at the end of their knowledge about a topic. Similar to citizens on medicare protesting "socialism" while at the same time cautioning the government not to meddle with the health insurance system they're benefiting from . . .

I'll leave it at that . . .

Sep 19, 2009 03:24 AM #144
Rainmaker
310,387
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Sinclair was an avowed Socialist, Carl.  (he's the guy that said "America will take Socialism but they won't take the label").  I haven't read Zinn but I know he was under the Sinclair influence when he wrote his plays and essays.

I find it interesting that the "right," which I'm assuming you are based on the responses you've made to some of the comments posted here

I prefer freedom-lover but that's all semantics, isn't it? 

apparently your "high school social studies teacher" forgot to assign when you attended high school." A high school level class in economics might be helpful as well.

I even read some books that were not on the approved reading list but alas, I received no extra credit for my intellectual curiosity errant ways.

We have fundamental differences in our approach to prosperity.  Based on our respective beliefs, I doubt we'll ever see eye-to-eye.

Fair enough, Carl.

Sep 19, 2009 03:38 AM #145
Rainer
128,627
Dan Quinn
Berkshire Hathaway HomeServices PenFed Realty - Silver Spring, MD
Dan Quinn

What will happen to the housing market after the 1st week of November?  The opportunity to take the tax credit will be effectively gone since one must settle by Dec. 1st.  Will the buyers then take a hiatus and wait for the next tax credit announcement from the govt?  I think so.

We'll all know this answer soon enough.  I only hope that congress gets it and gets out of the market's way.

Sep 19, 2009 04:10 AM #146
Rainer
21,903
Jay Anderson
Century 21 Cornerstone - Cypress, TX

Great work, Brian - thank you for it.

Oct 05, 2009 06:44 PM #147
Anonymous
Jerry Shilling

I agree. By providing the first time home buyer money the government os delaying the enviable. Therer should have never been a bail out for any one. Let the market correct itself regardless how bad it gets.

Oct 13, 2009 10:36 PM #148
Rainer
14,747
Greg Vogel
ICOR - Fort Collins, CO

I agree...mostly.  It's tough to see the true effects of all this govt. stimulus until things in the market progress a little more.  I think it could go either way as far as our economy recovering.  BUT, I think we have fundamental big problems in our economy and all this stimulus is just extending the problem - we need a new solution.

Nov 01, 2009 03:33 AM #149
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