***WARNING*** Not for the faint of heart. The housing market has imploded and the economy, built on credit only in recent years, has tumbled down on top of it. The elected officials (please never use the word "leaders") have done the equivalent, and please excuse the comparison, of a wife-beater apologizing for beating his wife again.
The US economy is in a downward spiral and injections of trillions of un-backed dollars is only giving the appearance of rescue. Nothing is being rescued but, once again, we are letting these elected officials pretend to be economists and business people who have something personally vested to lose. Neither is true.
In 2009 more jobs will be lost. PEBO will likely create something similar to the CCC and put people to work, using the tax money from the people who are still working, and further the distribution of middle class wealth. While this may make the media feel good it will only serve to further handcuff the system from a faster restart. Welfare never starts anything. Welfare always cripples the economy.
As more jobs are lost the few things we still create in America will begin to be created overseas and the Unions will have finally destroyed American manufacturing. Of course your new President elect has indicated his support of eliminating secret ballots when union votes are taken at the local or national manufacturing plant. Has there been waste in American plants? Oh you bet. But not nearly as much as being forced to pay slacking workers on an equal basis as those who pull the weight.
In 2009 more homes will go into foreclosure and be foreclosed on than in 2007 and 2008 combined. Values will slow in their decrease but in most areas will not see a sustained recovery though there will be spikes. The biggest problem here is a result of two of the most short sighted, bone headed moves made by congress to date.
The most boneheaded move was to eliminate seller funded down payment assistance for FHA loans. Before you start your argument you need to know something you probably do not. For almost 5 years HUD was lobbying congress to be allowed to issue 100% loans to borrowers. To do this they first had to create a need for 100% loans by eliminating SFDPA. They were using the backing of a very powerful and very wealthy multi-family home owner's association in getting rid of seller funded DPA. When congress finally decided to eliminate SFDPA they hit HUD with a boomerang and not only denied them 100% loans but increased the required minimum down payment and created some language which means all 3.5% of the DP must come from the borrower. Previously some of the DP could come from seller funds -but no longer.
The second most boneheaded move congress made was to force changes in Fannie Mae which included limiting investors to only 4 properties on credit regardless of their income, assets and credit. So an investor who earns $250,000 per year, has $4,000,000 in savings and a credit score of 800 or higher can only have 4 properties on credit while tens of thousands of homes rot.
So if I am so opinionated what do I say?
Let it crumble. Let it all go to weeds and rust. That is the only way the enterprising, hard workers who definitely are abundant will be able to restart the economy. The welfare mentality of bailouts and handouts will only lead to further devastation, government control, punishment for success and reward for failure, and elimination of any higher denominators.
Welcome to the beginning of the Social States of United America.
Merry Christmas Y'all! But wait ...
What do you propose as a recovery? I can do what I can in my market helping home buyers get into homes and investors purchase homes yet my reach is limited. What do you propose and what can we all do together?
By the way, if we let it crumble I could, just like anyone else, lose everything -or adjust to something everyone in the brave new world needed and provide it.
THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.
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12 Comments
on The Worst Is Yet To Come - What Will You Do About It?
DEC
14
2008
Glad to see you have an optimistic view point. At least compared to mine!
The flaw in your very good agruement is the market was not free. It was manipulated. The cds's were outlawed at the turn of the last century as market destabilizers. The CEO's lied. Heck the head of Nasdeq is going to jail. If the market could be kept free I would agree with you. But until we have the guts to put rich crooks in jail for a long time Govt is going to have to try to protect us.
Wow - Talk about gloom & doom...things do not seem that bad in the Charleston, SC region...jobs are down a little but home prices have almost bottomed out and people are starting to buy and sell again. I hope your end looks up in 2009.
Charlie - pretty sure I never said "free market". The end of your comment IS the problem "Govt is going to have to try to protect us." They can't. They don't know how. Thanks for your comment!
Randall - there is no doom and gloom in this article and if you ever read anything I ever wrote you would already know that. I'm doing well -I'm one of the surviving small lenders still in business. Did you read the last sentence? This has nothing to do with how well Charleston is doing or how badly Las Vegas is doing -these are FACTS that many people with their head in the sand continue to deny. YOU may be doing well and that's the point of the article. Thanks for your comment!
Thanks for helping share the reality check! Like you said, all we can do is work hard getting homebuyers & investors into properties. Unfortunately, we have to wait for the Social States to crumble, before people put their hands back in their pockets, work hard & wake up!
The market always comes back....always. I don't know about your business, but for real estate agents, there is a direct correlation between the amount of commission income on the market and the amount of agents in the market at any given time*. Thus, I could give a hoot if the market goes down further next year....my market share will only increase.
Colleen - you get it!!!! "work hard getting homebuyers & investors into properties" Thank you for commenting.
Tim - you NAILED it! These other people who don't even read the entire post but jump to the bottom and comment are not "in it to win it!" Thanks for your comment!
Konnie - that's exactly what "they" want you to do. Never give up. Never surrender. Hard work and persistence always pay off. Thanks for stopping in now get out and see the people!
Ken.... as boring as this blog might be, the second half of it was right on... and don't take that first part seriously. My eyes are bulging from reading mortage blog after mortgage blog... and I can see why it can be so boring to the average person... because the first part is common sense... when you started with your first and 2nd boneheaded comments, I was all over it in excitement... meaning, I couldn't agree more in both comments...
You said.. "The most boneheaded move was to eliminate seller funded down payment assistance for FHA loans."...
If people truly followed this discussion and HUD's reasoning, there was a hidden agenda... yes, HUD wanted 100% financing... now we are all suffering because of this. You brought up some excellent points here...
And your second comment about investors and investment properties? Bingo... did you read Beth Forbes blog?
Again, not sure if you read this.... overall, I loved this post and will flag it.. this should be a feature... and PS... yes, the market will rebound. It might not until mid 2011, which has been my forecast since late 2007...but when it does, the flood gates will open for those still around. And if we can keep out the greedy loan officers that didn't know how to spell mortgage, as it happened from 2001 to 2005... we make it tougher, we will then be able to ride it out for a long time to go... thanks
Ouch! I don't even know what to say or how to say it? I'm sharpening my axe anyway and everyway I can think of to "ride out the storm"....I just hope I have it sharp enough and can ride long enough.
I'm not to keen on the idea of losing everything I have worked for (my home and 3 investment properties) and hope it does not come to that extreme.
But, I can tell you from my market in Atlanta, we have some buildings that have not had One, yes not even ONE sale in a month, and some TWO months! If I can find any buyers willing to buy in this market, I can find them an awesome home!
Jeff - thanks! I checked out Beth's post and you are right for recommending it! Thanks for your insight and comment.
Thom and Ray - I have a feeling you are not nearly as affected by the down market as others are. Thanks, again, for commenting, again!
Lane - I have been thinking about being more open. You know, being introverted is not always a good thing for blogging. In reality you know by now I care deeply for my customers, my industry and my Country .... not in that order. Thanks!
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Glad to see you have an optimistic view point. At least compared to mine!