Robert Kearney writes an insightful post about housing values. It's preferred not to get political, but I find it difficult because what is government, but politics? The federal government is running the housing market, and they have for years. The sooner we face this fact, the better we can make informed choices about our futures.
This is what I learned when I got in the real estate business in Temecula Valley California in 2007. It's been quite an eye-opening experience.
Chapter 5: Big Banks and the Government are Broke
Face it, the Federal Government has effectively nationalized the housing finance industry. This is true for new loans and for how FNMA, FHLMC and FHA are liquidating their foreclosures and negotiating short sales. The government has acted to make obtaining a mortgage much more difficult, and is holding enormous numbers of Colorado and Denver homes, in particular, in inventory, waiting to sell them at better prices – they hope – in the future. If the big banks were to write down the value of their houses and mortgages to prices at which they can really sell them, they would be bankrupt (so what, they got us into this mess!). If the Federal government were to sell all the houses held in their three main mortgage entities cited above, the already enormous deficit would probably go up by 10% to 15% - immediately!
If Cartels are Bad, What’s so good about Big Banks’ and the Federal Government’s Housing Cartel?
So, rather than taking their medicine and selling the properties rapidly, as was done during the Savings and Loan crisis about 20 years ago, the current plan by big banks and the Federal Government is to judiciously mete out properties onto the market in an attempt to control housing prices by manipulating the supply of homes on the market, to control prices and minimize their losses. During the last housing crisis, housing prices dropped for several years, but housing and home values came back really strongly in the 1990’s and turned out to be good for everyone. The pain was short lived and strong price appreciation ensued. Today, in Denver – Colorado and Nationwide, the market is moving in slow motion and all the analysts and economists I have read see years of almost flat home values with very little appreciation and anemic new home sales, too.
In Denver, with just over 30% of all home sales being short sales or bank liquidations, the big banks and the federal government control housing the same way the Saudis and OPEC influence oil prices– it’s a cartel!
So, the government controls virtually all residential mortgage lending and the big banks and the federal government together control housing prices due to a huge share of sales in the market. Is this really America?
Yep, it still is. As a private lender, we help our borrowers with deals that they have worked really hard to negotiate with the Cartel, without paying too much!
Check out my other Blog Posts and Free Reports on my Web site for additional ideas about the market. Read more tomorrow on this fascinating subject!