Is the sky really falling?
Before we go off the deep end - with Big Media, Big Government and Big Business telling us that we are getting ready to jump off a cliff - take a few deep breaths and relax. I know times are trying - after all, I opened my own real estate transaction practice at the height of the real estate slowdown, but we need to take a long view at what is happening.
Real estate has been in a slump for two years now. It is about time for it to begin to recover. Read this article on CNBC about the July Case-Schiller stats. http://www.cnbc.com/id/26954270. On the face of it, things look pretty bad. However, once again, when you read the entire article, you will see that Las Vegas really skewed the numbers. Several statistical metropolitan areas (Including Atlanta) have shown modest housing price increases or only modest decreases - and the overall trend line if graphed would be flat.
This means that we have reached a bottom (since we are only now getting July numbers, and it is October). It is another bit of light.
My thoughts too on government intervention in the financial markets - leave them alone. Yes, the Dow Industrial Average lost 777 points yesterday and it was the largest single day point drop. Well, you know, there was a time when the entire Dow index wasn't even worth 100 points. To put the drop in perspective, it was only the 17th largest in terms of percentage - not as much as Black Monday in 1987 - not as much as 2001 - not as much as 1929.
Lenders only make money when they lend money. If Warren Buffett, a private individual, is willing to risk money to buy a stake in a troubled financial firm for his publicly traded stock company, Berkshire-Hathaway, then why should the American Taxpayer be the lender of last resort? Money will start to flow into capital markets to buy "toxic assets" - mortgage backed securities - because their value will begin to rise with the value of real estate. Hedge funds stand to make billions buying assets that have an artificially low value mandated by the "mark to market" accounting rules of Sarbanes-Oxley. We are not in this mess because of too little government regulation, we are here precisely because of too much government involvement. Why should we give even more power (and our tax dollars) to a government that brought us the Community Reinvestment Act, FNMA and FHLMC?
If we really want to make a difference for people who want to own a home and have financial barriers, it seems like the Habitat to Humanity approach with its "sweat equity" investment and equity lien make the most sense. Why not have a special seed money program for "Habitat like" programs in the faith based sector? Programs like that invest the homeowner in the property and are tailored to families with limited income and credit.
I could be dead wrong - after all, no one called me to see how they should vote on the Bailout Bill - but the best thing our government could do would be to eliminate the capital gains tax, eliminate taxes and rules that make it prohibitive for U.S. companies to repatriate profits earned in foreign countries, and repeal the portions of Sarbanes-Oxley that require mark to market accounting rules.
Amount of taxpayer money required - zero. Amount of capital flowing back into the United States financial system - billions - perhaps trillions.
If you really want to figure out what is going on, just look at whose hand is out and who is crying the loudest for relief. Americans are tough and practical. We take our chances and want to either reap the rewards of risk or learn from the failures of our decisions.
Keep the faith - the tide will start to turn soon. How do I know? - Well, folks in government just figured out there is a problem! J
Comments(0)