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Is $7.9 Trillion a Lot of Money?

By
Real Estate Agent

Frank Garay and Brian Stevens of Think Big Work Small did a nice video spot today on not only the magnitude of the decline in the housing market, but then compared it to "other issues" that have been dominating the nation's attention (while Rome burned). 

Trillions in Lost EquityAs their presentation states, the nation's housing market lost $7.9 trillion of collective household equity from the first quarter of 2006 through the first quarter of 2009 (that obviously doesn't count any further erosion seen over the past two years).  Frank & Brian then compared the financial impact to other national concerns such as the estimated cost of the national health care reform bill (~ $2 Trillion), the cost of the wars in Afghanistan and Iraq (~$1 Trillion).  Both of these items dwarf the costs the entire nation has experienced in terms of our equity erosion.

I don't want this to get into a debate about the cost/benefit analysis related to those two politically charged issues. What I do wonder (like the guys at TBWS) is why the housing crisis hasn't received the same type of media & political policy attention those other topics have received?  I am in no way suggesting health care and the wars are not important (I fully understand their importance with a son ready to head off on his second deployment).  What I don't understand is why an issue that has from four to eight times the financial impact hasn't been near the top of the policy agenda?

Bank BandaidBailing out banks and throwing some bandaids at the issue (e.g. HVCC, tightened credit standards) hasn't solved the problem (and again, I'm not getting into the whole "bonuses" issue, credit default swaps, short-sale difficulties, or "robo-signing" issues here).  What would our economy look like today if, in an alternate reality, the over $3 trillion spent (and $11 trillion committed) for the bank bailouts (versions 1,2 & 3) had a different policy perspective and those funds were utilized to "re-constitute" the sub-prime loan portfolios that were out there? Or to "re-set" loan values for under water properties thus allowing people to sell when they needed to move for a new job or to downsize at retirement?  Allowing people who still had jobs to configure their debt structure to keep them in their home (making payments), or allowing them to sell their homes, and preventing the wholesale inventory increase we experienced? How much equity would have been salvaged within our economy? How much market place disruption could have been averted? Were there other potential pitfalls to this course? Perhaps, but we will never know because policy makers didn't take the time necessary to evaluate options and their was no apparent desire to have the type of public discourse seem in several other national policy (refer to examples above).

Debt ClockHere's one more figure everyone (especially the newly elected in Washington) like to talk about: $14 Trillion - the current debt ceiling for the country.  With nearly $8 Trillion in lost collective household equity (and sure to be higher when the 2010 & 2011 numbers are calculated), the relativity of the debt ceiling number has a whole different feel now doesn't it?

I am not a nobel prize winning economist or multi-billion dollar hedge fund manager, but I do have a bit of common sense and my common sense is telling me we should be focusing more of our national attention on the big stuff (the "real" big stuff not the perceived big stuff) or while we're all in a lather about health care reform (which doesn't really take effect until 2014) we end up going the route of Greece, Ireland, England or Portugal.  My message to Congress, focus folks, focus!  Our nation's economic future depends on it.

 

 

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Craig Frazer, Realtor, CRS, CDPE, GRI, CLHMS
RE/MAX Metro

Cell & Text: (801)699-6046
Email: cfrazer@remax.net

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Comments (1)

Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

I did a quick interview with Brian Stevens and Frank Gureay on video bloging you can view it here  

Aug 19, 2012 10:49 PM