I wasn’t all that surprised by his answer, after all he was a big supporter of Alan Greenspan. The very person I feel bears the most responsibility for the recession we currently find ourselves entrenched in. Unfortunately I didn’t have as much time with him as I’ve would’ve liked, so I wasn’t able to ask more questions. But it boggles my mind to see how anybody as educated and smart as himself could basically void the Fed of any responsibility, when it fact they’re the real culprit. We all know it starts with the Federal Reserve lending money to the banks at pre-determined interest rates and then the banks turn around and lend the money out to the general public in the form of home loans, business loans, car loans etc. Hence the reason that banking can be pretty darn profitable, due to the fact banks have the ability to leverage their capital through reserve banking at relatively high margins.

I not saying the banks aren’t to blame, I’m just simply stating none of this would have been possible if the Fed hadn’t kept interest rates so low. Despite the fact that demand for credit was strong and readily available to anyone that had a pulse. It would seem to me that the Fed would have been wise to raise rates in order to try to circumvent the situation we currently find ourselves in; but instead the Fed kept rates artificially low in order to keep the economy chugging along regardless of the long term consequences.     

Another form of government intervention that was almost just as disastrous was that of being in the mortgage business. As far as I’m concerned the federal government has no business being in the housing business in any capacity and definitely not in the business of insuring loans, it creates an unsustainable moral hazard. It is sort like someone approaching you and handing you a wad of cash and saying to you; look go take this money go to the casino lay it all down, roll the dice and see what happens, by the way at the end of the day your not responsible to pay back the money and you get to keep all your winnings, there’s no downside. Who in their right mind wouldn’t take the money and risk it all, they’ve got nothing to lose.

Now you might be saying hold on there are many banks that got slaughtered because of issuing bad home loans, that’s most certainly true assuming you were a smaller community bank with no political connections. Look at the number of big banks that got bailed out compared to the smaller community banks. Instead all that happened was that the bigger banks bought out smaller troubled banks, along with shoring up their own finances instead of lending it out; as was the governments stated objective.

I spent most of the night laying awake in bed debating whether I should attempt to do a short sale on the property I currently reside in. I owe just under $78,000 on the first mortgage and just over $28,000 on the second, which is an interest only home equity line of credit for a total of approximately $106,000, an amount I won’t even come close to getting. I tried to refinance on just the first, but unfortunately the property didn’t appraise at what it needed to be at for them to do the loan. Homes in my area of the similar size and features are now selling between 60 and 70 thousand. I bought the property for $87,500 back in 2002. I shouldn’t use the term “selling” it’s more like they’re being listed at that price range. If they sell or not is a whole other story for a later time, but

I figure if I put my property on the market for 64 or 65,000, I might have a chance to actually sell, but even at that price I’m pushing my luck and that’s considering if both banks agree to doing a short sale and I find a buyer.

If I strictly look at it from a business perspective a short sale is making more and more sense every passing day. Property values continue to drop, mostly due to the less than desirable job market here in Michigan, with no end in sight. Most people that I talk to only feel things are going to get worse, maybe even much worse, before they start getting better. For several reasons; the first being the automotive industry, many people that I talk to that know a lot more about the auto industry than myself say it’s just a matter of time before GM runs out of money again. If this happens as many have predicted, it’s going to create a huge dilemma for this administration, one that I can’t see ending well for the people of Michigan. As it is people are mad as hell right now for several different reasons and I don’t foresee the American people sitting idly by as the Obama administration and the UAW help themselves to another bailout. Don’t get me wrong the UAW isn’t going to out without a fight, but with that said I don’t think President Obama is going to risk his political career for his UAW buddies, I could be wrong, but he seems like he has way to much political savvy to allow this to happen.

Considering the auto industry has been heavily subsidized for almost the last year and Michigan still has the highest unemployment rate in the nation, can you imagine what is going to happen when the government is forced to turn off the money spigot, it’s going to be a barren desolate financial waste land if Michigan doesn’t starting heading in a new direction.   

Which brings me back to the issue of short sale or no short sale; I am putting my house on the market today for 64,500 any takers please contact me ASAP, also I’ll be happy to negotiate assuming the banks allow for it. Reason being; I don’t see things turning around in this state anytime soon, therefore I don’t see property values going up anytime soon and if they do, not anywhere near what I or the majority of my neighbors would need in order to hit the break even point. Oh one other thing I should mention; they’re expanding the highway behind our house, another reason I want out. Unfortunately for us we were on the wrong side of the highway and therefore aren’t being bought out by the state. I was so hoping we would.

The idea that government can some how prop up housing prices that where grossly inflated, largely due in part to the government’s involvement in the housing market in the first place, boggles my mind and leaves a lot of unanswered questions. First being is how are we going to pay for all this new spending and what happens when all this printing of money causes run away inflation, which will have a direct negative impact on the housing market, by the Fed having to raise interest rates in order to control inflation. Higher interest rates will lead to higher unemployment due to the fact that employers can’t obtain affordable lines of credit in order to meet payroll and other short term debt obligations. This is a very real threat that this administration as failed to address and for good reason. Because reality is this; it doesn’t matter what action they take to “fix” the housing market, all attempts of trying to reverse the market is going to do more harm than good and many politicians from both sides of the aisle know this. But they feel the overwhelming need to act, even if it’s going to do more harm than good, for nothing else then to give the impression they “care”, but in reality the only thing they really care about is getting re-elected. 

The wisest action of our politician’s is inaction, stop trying to be the hero’s you’re not, you’re making things much worse then need be. All of this bad debt has to flush out of the system, so the markets can correct themselves. If correcting of the market’s means some businesses fail and people lose their homes, which it will, so be it. It is a hell of a lot better than the alternative. Failure is not the end all; instead it’s a fresh start to a new beginning.  

But oh no, can’t sit by and do nothing, that would be politically unacceptable. So what they do; they pump massive amounts of our money into pet projects along with giving billions more to the banks, all in the name of saving the economy. But as we have seen with the first 350 billion it didn’t go as planned, which was predictable considering the situation. Instead banks took the money and hoarded it to shore up their own finances and acquire other banks. It did nothing to increase the demand for housing as sales numbers point out. If I as an individual am hemorrhaging money to the point where I am on the verge of being insolvent, you think that I am going to do the same thing that got me into that dire situation in the first place.  Hence the reason the banks decided to play it safe by keeping the money instead of lending it out. Keep in mind this is all being orchestrated by the very same people that help us get into this mess in the first place.

Here are the facts as we know them. President Obama wants to cut the deficit in half by 2013. Sixty-eight percent of small business owners under Obamas’ tax plan are going to end up paying higher taxes. Seventy percent of all workers in this country are employed by small businesses. Even if you where to confiscate all the money earned from people making $75,000 and above, it still isn’t enough to cover the cost of the new spending that has been proposed thus far by this administration. 

As the numbers show it’s mathematically impossible to cut the deficit in half as the President stated he intends to do without significantly increasing taxes on small business and the middle class. As most people are already aware of; increased taxation deprives the private sector of needed capital it takes for expansion and job creation, assuming the economy is healthy. But as we all know this isn’t the case at all, so now it becomes more of an issue of being able to keep more capital in the private sector as a means to stop the bleeding, rather than looking to expand and increase the number of employees. If any one has doubt’s that higher unemployment will lead to a further decrease in home values, just take a look at the State of Michigan.

Regardless of where you might stand on the political spectrum, one thing we can all agree on is the new administrations numbers don’t add up. The bottom line is that the federal government has proposed so much new spending through this latest “stimulus” bill that it’s nearly impossible for hyper-inflation not to occur within the next ten years, as history has shown us. The Federal Reserve will have no choice but to raise interest rates putting further down ward pressure on housing prices causing decreased demand due to higher monthly payments. The federal government will be forced to cut spending which will lead to decreased amounts of money going back to the states to pay for “essential” services, forcing state governments to raise property taxes (at least until people rebel), even though property values will continue to drop. Increased taxes on small businesses will cause higher unemployment causing the demand for housing to fall. As employment becomes ever harder to come by, people will be forced to opt for lower paying employment decreasing their ability to buy higher priced homes. The people that are employed will have essentially lost their ability to collectively bargain for any real wage or benefit increases (yes, even the big Unions, look at the UAW). Real wages will continue to decrease as the buying power of the dollar continues to be eroded away as hyper inflation sets in, having a major negative impact on the standard of living in this country. The stock market will continue to drop as corporate earnings fall and corporate tax rates rise, just another factor that will contribute to the lowering of property values, as people have less money to put towards a down payment, a practice that has remerged in recent months as the banks try to protect against future losses.  

Americans will no doubt see a major decrease in their standard of living within the next ten years, falling housing prices are just the tip of the iceberg. Don’t get me wrong there will be some good to come out of this latest stimulus bill in the form of much needed infrastructure improvement and construction jobs, but the long term negative implications will far out weigh any short term benefits.    

Capitalism without failure is like life without risk; impossible. Imagine life without risk, we would all be driving around going 110 mph without regards to our own safety or anybody else’s for that matter because we would all be immortals without a care in the world. In essence this is exactly what happened in the secondary mortgage markets. These banks went around acting like immortals, by passing the risk off to the Federal government via Freddie Mac and Fannie Mae. Our governments’ policy of “too big to fail” has created banking immortals propped up by us the American taxpayers, we are going to ultimately be the ones that are going to be killed via hyperinflation, as a direct result of our governments irresponsible and reckless actions. Good bye capitalism, you’ll be dearly missed by many, thanks for the memories.

Reozom.com a smart way to buy and sell

Have you ever seen anybody try to market a property for the mere fact it’s listed with a Realtor. No of course not, because the fact that it’s listed with a Realtor brings no added value to the property, as is the case with high quality windows or a reputable builder having built the house. Completely the opposite; having a Realtor involved in the transaction does nothing more than artificially inflate the sales price, but contributes nothing of lasting value.

Realtors do most of the work, that’s why they get paid the most. FALSE/TRUE, Realtors do the least amount of work, but stand to make the most. This statement is especially true for listing agents. Out of all the people involved in the transaction (seller, buyer, inspector, mortgage broker, title insurance provider, appraiser, attorney and agents) the listing agent does the least amount of work, yet receives the greatest piece of the pie. This statement might not have been true 10 or 15 years ago, but the Internet has made life much easier for the average agent. The Internet might also be their demise as well.

Realtors are professional Marketers and can Market a house better than the property owner.  FALSE. This couldn’t be more untrue. Realtors are NOT professional marketers, if they were they would have a Master’s degree in marketing and likely own their own marketing firm or working for a well established one that offers a steady pay check along with a hefty benefit package, something their current occupation doesn’t offer.

The biggest marketing tool they have as their disposal is the Multiple Listing Service otherwise known as the MLS. Why do you think the National Association of Realtors (NAR) spent millions in legal fees trying to keep limited service brokerage firms off the MLS? Because they realized once everybody had affordable access to the MLS, they would be forced to compete with brokers that refuse to tow the line when it pertains to the type of services they want to offer and the type of commissions they want to charge, essentially causing their monopoly to splinter due to a lack of cooperation and submissiveness that is required to keep such a business model intact.  

Using a Realtor to coordinate the closing makes for a smoother transaction. FALSE The title company coordinates the closing, not the agent. The agents only job when it pertains to coordinating the closing it to ensure the title company they use is good at what they do; to make sure the closing takes place in a timely manner assuming everything pans out with the financing.

Realtors will not show FSBO listings. FALSE I never had a Realtor say to me after finding out that the property I had listed on the MLS, was actually being sold by owner that they didn’t want to show it or make an offer on it because it was listed by owner. Now I have had agents say that the commission they’re offering is to low, but I never heard or seen an agent bulk at showing a property that was offering a 3.0 percent or higher commission to the buyers’ agent at least not in my area. After all what is the agent going to say to their buyers if they want to look at a house that just happens to be listed by owner? I refuse because it’s listed by owner; go find another agent to show it to you. I highly doubt it.

Open Houses help you sell your home. FALSE There are always exceptions to the rule, but for the most part, Realtors hold open houses to attract buyers and not as a marketing tool to sell your house even though they try to sell it as such to potential clients during the interview process. That is why you see a lot of new agents at open houses and not the actual listing agents. The new agent gets the opportunity to obtain buyers, while at the same time the listing agent keeps their sellers’ happy by carry through with their promise. I never once sold a house because of an open house, but have picked up plenty of buyers for other properties in the process.

Quick side note about holding open houses, not only are they a complete waste of time for the most part, but there dangerous as well. Many agents have ended up robbed or even killed while holding open houses. At least when you’re setting up a showing you can pre-screen the person over the phone before letting the person walk thru the door, something not possible with open houses.

Brokers protect their clients from liability. FALSE Brokers protect themselves and their agents by purchasing Errors and Omissions Insurance. You are responsible for protecting yourself against any claims of misrepresentation that might be brought forth by the buyer. That it is why it is absolutely essential that a seller hire a competent real estate attorney to help ensure that being sued for misrepresentation is minimized. Something a Realtor does not have the ability or legal authority to do. That is why in some states it’s not only recommended that an attorney be hired to review the disclosures and sales contract, but  mandated by state law.

Realtors are highly educated when it pertains to the home buying and selling process. FALSE In most states all that is required to get a residential sales license is a high school diploma or an equivalent, 40 hours of class time along with a cumulative test and several hours of continuing education to keep your license in good standing. If you can learn what forms to use when and for what, you have what it takes to be a Realtor. Your average person could read a few good articles on the subject and be just as informed on the subject matter as your typical Realtor is or will ever be. Just with like anything else there are exceptions to the rule, but for the most part this holds true.

Homes listed with Realtors, sell for more FALSE This is a falsehood that the National Association of Realtors loves to try to sucker the consumer into believing by referring to a study they conducted (keep in mind these are the same people that got on national television and swore up and down that home values  would continue to rise, regardless of the fact that the average persons  income wasn’t  keeping pace.) Unfortunately for them; every independent study conducted has shown otherwise. Like the recent study conducted by Northwestern Dept. of Economics that shows For Sale by Owners (FSBO’s) obtained a sale prices no lower than the sale prices obtained by owners using a Realtor. This is BEFORE subtracting commissions.

The bottom line is this; market forces (supply and demand) dictates what someone is going to pay for a property, not whose yard sign is planted in the front yard.