The Housing Meltdown

As Carl Sagan used to say “billyuns and billyuns” when talking about the Solar System. Now, government officials, and I used the term very lightly, talk about Billions and Billions. Carl talked about stars, they talk about YOUR DOLLARS. We started with $160 Billion in February, then $300 Billion in July, then $750 Billion and now $827 Billion and soon to be another $900 Billion. These dollars as well as annual refunds to non-taxpaying ‘taxpayers’ will come from your pocket … and you know it.

The National Association of Realtors (nothing more than a trade organization with the 3^rd largest PAC in the U.S. and an extremely strong lobbyist group) pushed to deregulate the housing industry in its’ entirety in the early 1990’s for fun and more profit. Starting in 1992, credit and mortgage qualifications were loosened up through Fannie Mae, Freddie Mac and HUD. The ball started rolling. As the economy slowed in 1997-1998, the President (Clinton, not Bush) ordered the respective CEO’s to further loosen the reins on credit and mortgage qualifications. NAR smiled. Everyone deserved a house! New Real Estate agents flooded the market and their holding companies prospered, immensely. NAR’s latest success was another delay in the long delayed revisions to RESPA which attempts to control mortgage company fraud as well as fraud in the related businesses of title companies, appraisal companies and real estate companies.

The real estate market peaked in 2003. The players were well aware of the peak, did not want to see a slowing, and (under the deregulation that occurred in the 1990’s) pushed to literally open the barn doors for anything that was breathing. Non-profit companies such as Nehemiah, American Dream, Home Gold and many others popped up to charge the Seller a $500 or more fee to take up to 6% of the purchase price from the Seller to give to the Buyers who were encouraged because these ‘gifts’ were from really nice people ... this event caused a 6% fake appreciation rate to occur immediately and then become repetitive. People who could not save a dime, people who were in credit card debt up to their eyeballs, people with recent bankruptcies, people who were allowed to claim any income level they wanted without verification, and even people who were illegal aliens all thought they too should hop on the bus and buy a house using Mexican Embassy documentation.

Mortgage companies implemented low down, then no down, then “No Doc” loans coupled with Buy-down ARMs that carried 5.75% margins (up from 2%) and added on Interest Free and Option Loans to keep the ball rolling and the profits coming in. They hired their own internal appraisers to control valuations.

The builders opened their doors wide, raised their prices, hired their own internal appraisers and set up their own mortgage companies.

Independent Appraisers were told to meet the needed appraisal numbers or find another job.

The news media and TV networks contributed heavily to the impending problem with fraudulent news manufacturing and TV shows like Flip This Junker and Find A Dummy To Buy It.

And then, in 2006, the ball stopped rolling ... the tipping point had been surpassed. Greed started to rear its’ ugly head.

By late 2006, it was apparent that the Mother of All Scams was collapsing. Not Me, Not My House became a household phrase as people saw their expectations collapse.

Mortgage companies starting dumping their mortgage loans on the unsuspecting Stock Market ultimately creating one of the largest devaluations of the Stock Market in history.

The folks with the Flip This Junker and Find A Dummy To Buy It suddenly found out that the people who were dumb enough to the buy the junk, could no longer get the loans to do it. The flippers suddenly found out that they were underwater with the second mortgages they secured to buy those junkers to flip as they couldn’t find buyers anymore.

And here we are in 2009 … the housing market has collapsed back to 2003 and 2004 values. Nobody wants to believe it. Facts is facts! Lots of folks fell for the Scam and will now pay for it for the rest of their lives. With the current socialist direction of the government, they will be paying for it for the rest of their grandchildren’s lives.

So, what do you do now? First off, if you don’t sell, you don’t lose. The market should recover back to 2003/2004 levels by 2011 or 2012 and start to pick up steam in the 1% - 1.5% per year range soon after. Keep in mind that a good 10%-15% of the potential house buyers no longer exist … they were not really qualified to begin with and definitely are no longer qualified. Population growth will ultimately solve the problem.

If you do need to sell now, you can still win! Granted, your house has lost a lot of perceived value, but so has the house you wish to purchase. You will be even. We can save you some expenses by reducing our listing fees and rebating a portion of the purchase commission fees paid by the seller back to you. We do ask that you request the rebate at our first meeting in advance.

Also, if you decide to buy new construction anytime soon, don’t think there are any real deals out there. Most new construction continues on at a very high rate of overpricing … now attempting to recover their anticipated profits in their Ponzi schemes. However, there are always good quality, right priced builders out there if you know where to look … we do know where to look! If you must have new construction, we can help by rebating up to 1.5% of the purchase price in cash back to you at the closing. And, we can tell you what is and what is not a good deal.

All you have to do is ask for the rebate … at the beginning of your conversation regarding the selling and/or buying of your house.

Ken Fisher, Realtor

Broker / Owner

Ken R Fisher & Associates, Inc.

317-845-9511

KenFisher@Realtor.com