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News Flash - Real Estate Values To Increase!

By R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Mortgage and Lending with Bank of England (NMLS#418481) NMLS# 1046286

November 28, 2007 07:05 AM

As is sometimes the case here on AR, I'll read a posting and it will inspire me to write a post of my own on that or on a related topic. This is the case here.

I just read a post about being careful with what you say to your buyers regarding real estate as an investment. It's Lenn Harley not that I disagree with Ms. Harley, I do think that a real estate or mortgage professional should be careful with the advise that they give out. However, I honestly don't think that you need to be fearful of telling people that buying a home is an EXCELLENT investment!

That's not to say that it's guaranteed that home prices will appreciate into the future, but it's highly likely in most real estate markets in the US. Here in the St Louis real estate market, I think that it's a pretty damn safe bet that in the long haul that real estate values in St. Louis will rise.

I base this believe (and that's what it is) on the fact that the US population is expected to increase to 400,000,000.00 people by the year 2050 based upon various population studies. I also believe that the current negative trend in home prices is based upon something related to, but not to the economics of the housing market itself.

Merrill Lynch Logo I might be wrong, but if the big Wall Street investment houses hadn't started packaging CDO's (collateralized debt obligations) where the risk to the investors was obscured by their having been rated AAA+ by the various rating agencies, the housing market would still be chugging right along.

As I've pointed out in other blogs, even the worst of the sub-prime or other non-conforming mortgage products weren't evil in and of themselves. While I doubt that giving 100% stated income loans to people with bad credit was ever a good idea, if the investor who bought into a pool of mortgages made up of these had been properly disclosed to and still made the decision to buy the security, then it would have only been a risk management decision on their part.

The reason that the housing market is suffering isn't because the economics of the market having changed due to Population changes Nationwide sociological or demographical reasons. It's because the credit markets have collapsed.

The credit markets didn't collapse because of sub-prime mortgages. They collapsed because investors were mislead as to the quality of the CDO's that they were buying. If the various sub-prime and other non-conforming mortgage products had been packaged by themselves, they would have been rated appropriately and investors could have bought or not bought these packages accordingly.

Even still with hindsight being 20/20 and CDO's being water under the bridge, I'm still optimistic about home values in the long haul. Even if the government does nothing, eventually the credit markets will straighten themselves out. The population will continue to rise, people will still need roofs over their heads and buyers will return to the markets. Prices will stabilize and then start to appreciate again.

I felt so strongly regarding my interpretation of the economics of the real estate market that I just purchased a home in September and have dumped a good deal of money into fixing it up. I wouldn't have done this if I thought that the current crises in the housing market was anything more than a bump in the road. A big bump, but still just a bump in the road.

Having made this investment myself, I have absolutely no problem telling a client that I believe that investing in a home is still one of the best investments available to the average American. If you don't believe me, ask Warren Buffet or any of the other riches people in the country. I don't have the statistic handy, but I believe that it said something like 98% of the richest 20% of people in the country own their own home. When Mr. Buffet jumps ship and sells his home in Omaha, then maybe I'll change my tune. Until then, I am gung ho on the real estate market!

R. B. Mitchell

ValueList Real Estate Services, Inc.

Bob Mitchell is president of ValueList Real Estate Services, St. Louis' largest discount/full-service real estate and mortgage company. If you would like to find out more about Bob, ValueList or our flat-fee listing program, please feel free to visit our web site at valuelistre.com

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Bob & Carolin Benjamin

Benjamin Realty LLC - Gold Canyon, AZ

East Phoenix Arizona Homes

Interesting post with things to think about. Thanks for sharing.

Nov 28, 2007 02:05 PM

Renée Donohue~Home Photography

Savvy Home Pix - Allegan, MI

Western Michigan Real Estate Photographer

Bob, this is an absolutely amazing post and a well deserved gold star. Our new construction prices have bottomed out and bounced up in less than one month's time. We are seeing healthy absorption in our REO listings market. Real estate is a good investment only if you are wise to market conditions and use an agent wise with market conditions to help guide you into the best possible purchase. Our rental market is so incredibly pressured that some renters have no choice but to buy because it is a landlord's market and they may not accept that pet, because they can. Renter doesn't want to part with fur baby so they turn into a buyer. How crazy is that?

Nov 28, 2007 02:28 PM

Josette Skilling

Keller Williams Capital Properties - Bethesda, MD

Nice post. Over the long term it's certainly been a good investment for a lot of us. I'd like not to forget that it's also a home...

Nov 28, 2007 02:37 PM

Jackie Hawley

Coldwell Banker Professionals - Oxford, MI

Southeast Michigan Real Estate

It's a fact that real estate is a sound investment, not opinion. It's naive to think you can purchase a home, do nothing but live in it, sell in a few years and make major profit even in a good market. Most investments, especially safe ones, are long term. Below is a link to the US Census Bureau showing median home prices, by state, from 1940-2000. The top table shows home values adjusted to 2000's dollar. There is not one decade that showed a price decrease in the US. With a fixed rate mortgage, your house payment won't go up (unless your taxes are part of the payment). It also doesn't reflect the tax deduction you get with home ownership versus renting. The second table uses unadjusted prices. Both tables are also broken up by state. The charts are based on statistics- not opinion.

Historical Census of Housing Tables Home Values

Nov 28, 2007 02:52 PM

Ryan Dick

Big Old Dog LLC - Buffalo, NY

Bob,

Could you please provide an URL to the map image in the post?

Thanks,

Ryan

Nov 29, 2007 12:15 AM

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

That gold star does catch people's eye, doesn't it! Thanks for all the comments!

Lynn: First, thank you for sparking this debate. I did catch your drift regarding the short term risk involved if a person decides to sell their home in the first couple of years. And I do agree with you that this fact should be pointed out to potential buyers as one of the potential pitfalls of home ownership. I used to say that if you're not planning on living in the house for a minimum of three years, that you should probably consider renting. With the current market conditions, I've pushed that number out to AT LEAST 5 years.

As far as the risk of giving financial advise, at least in terms of real estate, I feel that is part of the risk that goes with being in business. One of the reasons that people work with me is that they know that I follow economic trends and have a certain amount of expertise in this field. That said, I always make sure that my clients know that the advice that I'm giving them is based upon my OPINION and that I can be dead wrong.

A shorter term example of how I handle this sort of situation is when a borrower asks me if they should lock or float their rate on a loan application. The first thing that I tell them is that a bird in the hand is worth two in the bush, but if they want to hear my opinion, that I will be happy to give it to them. I also point out to them that I can be dead wrong and that if they take my advice and I am wrong that they are the ones who are going to have to deal with the consequences. If they desire, I then give them my opinion.

To me it's no different than an analyst rating a particular stock a buy, sell or hold. If you listen to them and they are wrong, then the loss will be yours, not theirs. (as long as the analyst isn't doing something sneaky!)

Again, thanks for your post which got me thinking on this issue!

Kate: I'm sorry to hear about your loss on that home. That sucks! And I agree with you big time that it's never a good idea to speak in definite terms regarding most anything based in the future. Your agent was wrong to use that word, never!

As far as your economic analysis of income and housing prices goes, I'm going to look at that issue and write a post on it. My gut level is that the two things aren't necessarily connected, but I haven't done the analysis yet, so please check out my post when I put it up.

Ryan: Thank you for your kind words! If left to me, I'd cite all of my sources and include formulas, but then nobody would read past the first paragraph! ;-) Again, thanks for the compliment.

Dick: I respectfully disagree. While no one can predict the future with 100% certainty, for the most part it's not really that hard to connect the dots and to predict "an expected" outcome. If you reread my posts, I pretty much always make my predictions conditional. (notice that even then I put in pretty much because if I had said, "always" someone would have found a time that I hadn't!)

You have to remember that NOTHING is without risk. Just the other day I got up out of bed, stepped on the cat who decided that she wanted to sleep on the sweat pants that I had left at the side of the bed. Feeling the cat under my foot, I lifted it up and fell on my ass! If you had asked me the night before if I would have any trouble getting out of the bed the next morning, I would have told you, "probably not!". But then I would have been wrong! Know what I'm saying? Thanks for the comment!

Kelly: UhRAh! ;-) You have to believe in your product in order to sell it. That said, if the economic circumstances came around to where I didn't think that real estate was a good investment, I would take the advice that I get on here so often to "find a different job!" As of right now, I do believe in real estate being a good investment and will argue with anybody who says that it's not (at least in the long run).

Maria: Thank you for the compliment. I wonder sometimes what drives people to comment on one blog, but not another?? To me it's a mystery! Thanks again.

Ruthmarie: I think that you're right on in your assessment!

Debbie: Thank you too for the kind words!

Armando: My gut tells me that you're probably right in your two year outlook. I am afraid that it could be longer if nothing is done to fix the credit market. Due to big money politics, I doubt seriously if anything is done sooner than 2 years to actually fix the problem. As I've mentioned before, generally speaking, nobody changes unless there is enough pain to make them want to change. Where this pain point is, I don't know, but as of right now, we're moving in the wrong direction to actually fix the problem.

Robert: Over the years I've done a bit of flipping, but have gotten out of that market because the short term is so uncertain. Therefore, I agree with you!

Bob and Carolin: You're more than welcome! Thanks for reading and commenting on my post.

Renee: You made my point better than I ever could have. Lynn is still right as far as the risk involved short term (even in Vegas where people might be more inclined to role the dice on where the real estate market is going) but you're right on with your point that having an agent who keeps up with the market and is willing to give you their honest opinion is a good thing. To me, it's part of our jobs! Thanks for the comment!

Josette: You bring up an excellent point that I and I didn't notice that anybody else had brought up....in addition to the investment part of buying a home you also get the added benefit of having a roof over your head! That has to factor in when making a home buying decision!

Jackie: As much as I would love to agree with you....I can't. As the mutual fund commercials disclaim, "Past performance is not a guarantee of future performance" or something to that effect. While real estate values have done extremely well over the years, this is no guarantee that it's going to continue to do so. While not likely, if for some reason the population predictions are wrong and instead of increasing our population decreases, then all bets are off regarding real estate values. Also, sense NAR is right in their advertisements that all real estate markets are local, outside events (called externalities) can have a dramatic effect on real estate values in a particular market. An example would be the oil bust that happened back in the 80's around Houston. My sister bought a home (ironically in the same subdivision as the matriarch of the Poor's family (that started the rating agency Standard and Poors) for about 1/2 of what it had sold for just a couple of years earlier. So, as a couple of folks have mentioned in these comments, never say never and never say always...;-) All that said, I'm still confident in the real estate market.

Ryan: I had that as a jpeg, but I'll attempt to find out where I got it from. Thanks for the comment.

Again, thank you all of the comments and I look forward to continuing this discussion!

Bob Mitchell

ValueList Real Estate Services, Inc.

Nov 29, 2007 03:54 AM

Christopher Ohlsen

Credit Werx, LLC. - Malone, NY

I think it is important to put your money where your mouth is. The fact that you bought a home in the current market sets a great example for those who are on the fence. A person in your position has the ability to influence those around you and in so doing you are doing your part to revitalize the current state of your local real estate market. Kudo's to you.

Nov 29, 2007 05:30 AM

Jason Sardi

Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC

Your Agent for Life

Hey Bob- Long time, no see. I agree with Maria, surprised there aren't more responses. None the less, I believe giving advice to clients that Real Estate is a good investment is sound advice...though I'm on the side of it being a good long term investment. Historically speaking, that certainly is the case in most regions of the country. Though, I do worry of where prices will be down the line in some areas and if the income will follow suit.

Nov 29, 2007 06:16 AM

Lewis Poretz

Apex Home Loans - Annapolis, MD

Business Development Manager

I too believe that real estate is a great investment and a very safe one --- long term

I can also tell you if you are buying in the Washington / Baltimore area.... it will certainly be long term until you see equity building in todays market - yes , it will turn, but i think we are possibly 2 years away in this area anyway......

Nov 29, 2007 01:04 PM

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

Christopher: My decision to buy was totally self centered. I looked at our local economy here in St. Louis and while we've lost a corporate head quarters here and there, the St Louis economy is very diverse. We still have some old line manufacturing left such as automobile and aircraft, aw well as new age stuff (St. Louis is in the forefront in Biotechnology). And who can forget those all of those cruise missiles and smart bombs you see blowing stuff up all the time?

Over-all, I didn't see why my local market here should suffer long term, so I bought. That's not to say that I didn't beat the hell out of the seller when negotiating the purchase price! ;0) Thanks for the comment.

Jason: It's good to be back! I much prefer blogging to hammering nails all day! Thanks for the comment. I agree that in some areas it might be a bit more dicey than others as far as real estate values go, but if you look at it over a 5 year holding period in just about ALL the markets, housing doesn't look bad. I realize that I'm out there by myself with my optimistic view, but mark my words....they fix the problems with the credit markets and we're back off to the races.

Lewis: Baltimore/DC did balloon a lot, but as I pointed on in one of my posts, there was a reason for it! People want/need to live in that area. Yeah, real estate prices sucked, but if you needed or wanted to be near our nation's capital, what were you going to do? I also think that there was opportunities in both Baltimore and DC to revitalize impoverished areas and to reutilize areas that are currently blighted. Thanks for the comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

Nov 30, 2007 01:34 AM

Anonymous

Ken Russell

Bob said:

I might be wrong, but if the big Wall Street investment houses hadn't started packaging CDO's (collateralized debt obligations) where the risk to the investors was obscured by their having been rated AAA+ by the various rating agencies, the housing market would still be chugging right along.

You are...wrong that is. Blaming erroneously rated Structured Investment Vehicles, Collateralized Debt Obligations, etc on being the culprit of the poor housing market is forgetting that the loans making up the SIV's and CDO's stopped being paid. Had there not been such a relatively large amount of failed loans making up those debt investments, the debt markets would still be chugging along. Unfortunately, when jumbo loans were given to janitors who said they made 150 grand per year, but really only made 15 grand per year, helped the AAA+ debt instruments go to Junk overnight. It only takes about 1.5% of all the loans to default before the debt markets are affected. Just ask the Brits who now get to pay for Northern Rock's 200 billion dollar bailout. We're at the 5% mark now and we're (read: YOU) are looking at a TRILLION dollars more in sub-prime resets in the next two years (forget about the OptionARM resets for the time being, which by themsleves would have created this mess as well). Your problem hasn't even reared its head here in St Louis. Get yourself a copy of the St Charles or St Louis County Business Journal and flip to the back and see how many MORE auctions are listed than were there a year ago. More than double and they keep listing more...and more...and more every week. Them's is data facts. Foreclosures are going through the roof, especially in St Charles County. Why? Because another part of the problem was that home owners believed the hype that their home values would keep going up forever so they took out seconds or refinanced so they could buy their Hummers and Escalades. Now those who need to sell their homes to buy a nicer, bigger home or need to sell because they have a new job or lost their job, refuse to believe that their home is worth less than what they paid for it (not to mention the depreciating Hummers).

This whole mess is much bigger than a bread box and blaming it on one part isn't addressing YOUR problem both now and into at least the next three years (especially for the St Louis area). There is a one year inventory in housing here in the St Louis area, and it needs to be sold. Unfortunately, as long as you (and existing home owners, and the NAR, and the local Realtor Association President cheer leaders) ignore Economics 101 and the Supply and Demand curves, your problem is not going to go away. If you want to sell the inventory, lower the prices. Stop blaming the glut in inventory on the media (like the St Charles County Board president continues to do) or the builders (yet another part of the problem as well). The media is NOT creating the incredibly high inventory (nor are poorly rated CDO's) and a positive media won't eliminate it either any more than Dorothy will if she clicks her heels three tiimes.

Feb 25, 2008 01:27 AM

#24

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

Wow...Ken.....where to start? Well, first, thank you for the comment. That out of the way, I guess that we'll have to agree to disagree. The "structured Investment Vehicles and Cdo's and the fact that they were rated AAA+ by the ratings agencies is indeed the root of the problems in the credit markets and in turn with the housing markets.

Why do you think that there has been so many "failed" loans, as you put it? Because people all of a sudden decided that it was unfashionable to make their payments? No, they didn't make their payments because they probably weren't good candidates for loans in the first place! Wall Street and the ratings agencies should have known this from the get go!

Another reason was that these loans adjusted to unsupportable levels. While I might have a 38% back end ratio at 7.25%, when my rate jumps to 12.5% or higher, it's only a matter of time before something has to give. When it's the house that is causing my heart ache and my credit is ruined already, why NOT give the house back.

You're right that it's a complicated situation, but the roots of the problem are pretty evident to anybody who wants to see it. Cutting the discount rate isn't going to fix things....nor is giving people a check for $600.00! In order to "fix" this problem the powers that be need to buy these loans from the loan servicer and reset the rate at an affordable rate. When the foreclosures stop, the glut of houses on the market will decrease and confidence in the market will return.

Bob Mitchell

ValueList Real Estate Services, Inc.

Feb 25, 2008 05:38 AM

Anonymous

Ken Russell

Bob said:

"Cutting the discount rate isn't going to fix things....nor is giving people a check for $600.00!"

We can most definitely AGREE to agree on that one. That one percent for a year-free money deal was one we could thank who? The banks? I think Alan "There Is No Sub-prime Problem" Greenspan can claim credit for that one.

The "structured Investment Vehicles and Cdo's and the fact that they were rated AAA+ by the ratings agencies is indeed the root of the problems in the credit markets and in turn with the housing markets.

The CDO's and SIV's which most definitely make the problem worse, are not the cause of the problem, they're just one of the pipes of fuel created to feed to the fire. I don't remember Joe Subprime holding the janitor at gunpoint, forcing him to sign a loan for a $417,000.00 house he could never pay for. Volition still exists and the janitor still has one. Certainly our own Citi's, BofA, Countrywide's, Goldman-Sachs, ad infinitum did their part to make sure that The Big Impeached He's 1997 mandate to make sure unqualified minorities get a house in which to live happened with gusto. Jesse Jackson and Al Sharpton buses filled with demonstrators parked outside the lenders' corporate offices made sure of that. Just ask Deutchebank and Dennis Kucinich's foreclosed district in Ohio. The politicians made sure it was damned if you do and damned if you don't for the banks. The banks just played along for the ride and found a Ponzi scam they could believe in and the politicians can now blame the banks for foreclosing on the very minorities and poor to who they demanded the banks provide loans.

When it's the house that is causing my heart ache and my credit is ruined already, why NOT give the house back.

I won't remind you that a guy named Bob is adamant that a house is always a great investment vehicle. The St Charles County board president agrees with you on that one as well so you both want it both ways. I mean, how can a person be upside down on his home when a home is such a great investment? Did the Citi's and BofA's hold the upside downers at gunpoint and force them to take the equity out of their homes? Who told them that they could always refinance when their loans reset? The SIV and CDO bundlers?

Mr. Yun, less than a year ago today, said that home prices would NEVER go down and that the bottom was here. (I believe he said that last May when most of the 300K-400K homes in St Charles County had only been on the market for five months on average. Now that most have been on and off the market unsold for over a year with NO buyers in sight...) Now, as he blasts Case-Shiller and lamely admits to negative numbers, he still stays at his Peter Principle level of incompetency located in a Looney Tune Cartoon painting smiley faces on all the unsold spec homes on all the foreclosed real estate near all the unsold existing homes.

The unregulated bundlers who created debt instruments out of whole cloth are merely part of the problem. They sure didn't cause it but they sure DID exacerbate it. Everyone, from politicians, the Fed, the lenders, the real estate agents, the home owners, all were enamoured with the free lunch.

In order to "fix" this problem the powers that be need to buy these loans from the loan servicer and reset the rate at an affordable rate.

Buy them with what? Write downs? And, who are the powers that be? Uncle Sugar Boob? If the powers that be is the government, sorry but I will have to agree to disagree. The government has no money other than what they take at gunpoint from you and I. I sure don't want to reward bad behavior. We do that enough with the welfare system. Plus, getting back to Joe Upside Down Homeowner, if he has a low rate on a home that is worth a 100K less than what he paid for it, why pay that off? Whether he pays 12% or 6%, he's still never going to get out of it what he paid for it. I certainly can't blame him for making a business decision to walk away, but I sure don't ever want him to get credit for anything for a very long time. And, if he walks away, what difference will it make if the "powers that be" reset the loan to a lower rate? Joe Upside Down is gone (driving away in a new Hummer or Escalade he bought when he refinanced with an altA). Resetting a rate on an abandoned piece of property won't fix anything. Changing a legal contract by fiat to keep inflated home prices inflated but occupied will only work for a short time and will only prolong the bad behaviors and make the problem much worse. Plus, that only works on the occupied homes and does not a thing for existing homes needing to be sold, new homes that are empty and new housing developments filled with empty lots.

Wishing on a star won't solve the inventory problems. Lowering the prices will. THAT is the fix. Free market economics demands it, even though the NAR's Chief Economist, Mr Yun apparently failed Econ 101 miserably. They WILL decrease but you need to decide whether it will be painfully (by changing existing and new spec homes into REO's) or less painfully by encouraging home sellers to lower their prices. Comparing the St Charles County Assessor's pages with the sales prices of homes, existing home sellers still think their home's value should increase by ten to twenty percent per year. I wonder who keeps convincing them of that? Hmmm, I wonder. If they were convinced that 3% per year is the average since the late 1800's, maybe some real estate agents and brokers and presidents of real estate boards might help get rid of the over one year supply of homes in the St Louis area. I guarantee you that Taylor Morley builders believes it now. Unfortunately, it's one bankruptcy too late.

Feb 25, 2008 07:52 AM

#26

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

Again....thank you for the comment! One thing that I would like to point out is that the vast majority of loans ARE still performing. The ones that aren't, for the most part, are the ones that either probably shouldn't have been made in the first place or ones that have adjusted to a point where the borrower is having problems making it because of their house note.

I wrote a post called, "4 concrete steps to stop the slide in housing values" if you get a chance, check it out. In it I go into what our government needs to do to stop this crises. It's not a hand out...it's not negating a legal contract by fiat....it's a realistic approach to fixing what is wrong with the housing markets and the credit markets.

I don't know how to make it any plainer that the REAL ESTATE market isn't the problem here. People want to buy homes! They NEED to buy homes and guess what, they WILL buy homes. The big question is when. Even if we don't do anything to fix the credit markets, these problems will eventually work themselves out. Prices will fall and the inventory will eventually be sold off. You are right, that is one option.

I don't think that it's the best option. Check out my 4 concrete steps and let me know what you think.

Bob Mitchell

ValueList Real Estate Services, Inc.

P.S. You obviously care about this issue, would you mind telling us a little bit about yourself? Maybe right a guest blog?

Feb 25, 2008 08:24 AM

Anonymous

I don't know how to make it any planer that the REAL ESTATE market isn't the problem here.

Well, you haven't made it just plain, plain yet either, so "planer" is putting the cart before the horse. I never said the real estate market was the problem at all and that really misses my point. You have an inventory problem. Whatever caused that problem, you and I sitting at our laptops laying blame at Big CDO, Big Oil, Big Bush, ad infinitum, ad nauseum, won't fix it. They're all to blame and if you read closely in my last post I said I AGREE with you regarding the $600.00 sugar candy hand out along with the Fed's insatiable idotic desire to print more money to fix the problem. Lowering the Fed and giving everybody 600 bucks is political "I Care For The Children" nonsense. However, changing existing mortgages for homeowners in homes they do not have to sell won't fix the inventory problem either.

I read the 4 fixes and got a good chuckle. Hydrogen fuel isn't stopped by Big Oil and evil Bush Republicans. It's stopped right now from being used because of simple thermodynamics and physics and that "there's no free lunch" thing. Plus, even if hydrogen fuel could somehow violate the less energy in/more energy out is impossible law of thermodynamics and be the power for all things next Tuesday, your inventory in St Charles Couny will still be as high, especially if the asking prices still demonstrate a ten percent per year increase in price or a price that reflects the original purchase price of the home PLUS the amount owed on the second mortgage to buy the Escalade.

According to 2005 US Treasury Department data, 50% of the top wage earners pay 96.54% of the tax burden. The top 1% (those who make $295,495.00 per year or more), pay 34.27% of the total tax burden. Not quite 99%, but more than one third. The top 10% pay 65.84%. I'm sure the government data would love to know your friends in mansions who only make 42 grand. Maybe they were the janitors with alt A or Option ARMs in McMansions who refinanced to pay for the sweet Mercedes Benz' and swimming pools. Hence, your rich needing to pay its fair share is ridiculous. They already do. They deserve tax cuts not more taxes. If Warren Buffet, a guy who has owned the same modest tract home for over thirty years, wants to send in more money, more power to him. George Clooney as well.

Instead of cheer leading with the "It's Never Been a Better Time to Buy" nonsense every week in the Real Estate section of the papers, agents may want to try a simple "Buyers Aren't Buying Now Because They're Not Going To Pay for Your House and Your Hummer Too" articles. Those of us with a big bag of cash, no debts, a great income and no house to sell want to buy a house. We really do. However, we're smarter now. And, people who can rent a home of equal value for several hundred less than what it costs to purchase do not NEED to buy, unless they choose to be stupid. After seven months of research, I did find a seller who lowered his price to less than 1.5% per year more than his 2002 pre-bubble purchase price. Plus, the 30 grand he spent on a new granite counter topped kitchen and custom cabinets and 50 grand on landscaping, I get for free. And, I didn't even need a buyer's agent. Go figure. I close this Friday. Location, location, location being equal, price isn't everything. It's the only thing.

Feb 25, 2008 09:56 AM

#28

Christine Thierry

Sterling Home Mortgages - Narberth, PA

CRMS

Yes, but when? I don't think for a couple years in most places.

Feb 25, 2008 10:17 AM

Anonymous

Ken Russell

Bob,

I forgot my name on my last response to you. Sorry about that.

Feb 25, 2008 10:54 AM

#30

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

Thanks for the proof read! I did see where you agreed with me about the so called "stimulus" package and the fed rate cuts. Regarding my belief that the government needs to come in and "fix" the credit markets, I think that it comes down to a "pay me now or pay me later" sort of situation.

As I've mentioned, the free market will take care of the credit markets....eventually. The big question is at what cost. I don't know the exact figure, but from what I understand US home owners have already "lost" trillions of dollars in equity that they had in their homes. This has GOT to make people feel poorer. Poor people aren't as economically as confident as wealthier people are and don't spend as much. This will eventually work it's way into the rest of the economy.

By the government creating an entity similar to the Resolution Trust Corporation to purchase the mortgages that are in danger of defaulting, they would then be able to work something out with each of these borrowers. I wrote more about this idea in my post, "I'm From The Government" If it's done right, not only would we as a society be spared a good deal of pain, the government might even make a buck or two for their efforts!

Regarding your figures on the income tax...this is a case of figures lying and liars figuring...(no offense...just a phrase). The income tax is only a portion of the money that the government brings in. When you factor in all of the fees, excise taxes, etc. that people pay, the rich are indeed getting over. It's also a case of putting things into perspective.....a family of 4 making $70,000 a year can't afford to pay the same percentage as some rich guy who makes $1,000,000.000 a year. With the current tax code, the wealthy can afford to hire professional help and have the money to structure their money in such a way as to take advantage of the tax code. A national sales tax would be much fairer (as long as a rebate is included to do away with the taxes on the first $30,0000 or so of money spent).

By doing it my way, the rich aren't taxed in an unfair way. If they don't want to be taxed, they simply don't have to spend their money. This creates savings formation which in turn is good for the economy. It also ends up taxing the underground economy, which the current tax code leaves untouched.

The "It's never been a better time to buy" mantra is self serving if it's said for the sake of saying it. In some markets I would be hesitant to buy right now, but in others I would drive a hard bargain, but I would buy. In fact, this is exactly what I did! From what you said, it looks like you did as well...congratulations!

So, I'll stick with my theory. When the credit markets are fixed...be it by government action or by working it's way through the free market system.....population increases and housing formation increases will provide a bottom to the market and prices will start to appreciate again. I personally would prefer that this begin sooner rather than later, but one way or the other....short of a major drop in population...homes are going to start appreciating again.

Christine: I'm a bit optimistic about this spring. The fact that I'm getting these calls about "when the bottom is going to be here" makes me think that it might not be that far away....as long as the credit markets don't completely collapse.

Bob Mitchell

ValueList Real Estate Services, Inc.

Feb 26, 2008 02:25 AM

James Graner

Residential Services: http://appraisalmo.com - Saint Charles, MO

We seem to still be suffering. It may be a long couple of years.

Jun 06, 2008 06:04 AM

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

James: You're right....we are still suffering. That said, I still haven't seen anything close to the amount of effort or money that was put into bailing JP Morgan out put into stablizing the real estate markets!

Unless the government does something meaningful to address the real estate markets, it's going to take a while for the free markets to work through this. Thanks for the comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

Jun 06, 2008 06:23 AM