October 2009 Remember the good old days before people stopped trusting their government and financial institutions? That’s when trusting wage earners still believed that, if they paid into the Social Security system all their working lives, their money would be invested for their own use instead of being paid out to support social spending programs for others, many of whom had not paid much in. Nobody explained that the cost of living raises built into their payroll taxes to offset inflation would be consumed by increases in their costs for Medicare and pharmaceuticals. The sacrifices wage earners made to put aside part of their earnings into 401K Plans and IRAs were rewarded by government manipulation of the credit markets that made their investments shrink instead of compounding over the years.
September 2009 Depending upon whether or not your particular ox is being gored, it seems to me that the world according to Obama is getting sillier and sillier. Here are some of the changes that have either been made, or are being considered: HUD has decided that things aren’t bad enough for the Mobile Home industry. It has proposed tightening its standards for improved foundations to include either a floating slap upon which foundations will rest, or a foundation that will extend beyond the frost lines. This will add several thousand dollars to the costs of installing a mobile home to qualify it for HUD financing while increasing the costs to consumers. That’s the bad news. The good news is that it will increase the value of all existing homes that might be “grand fathered” in under current HUD requirements. It should spur buyers to sell/buy existing homes while they can under the current financing regulations. In the midst of a deepening recession, during which people are using the mail less and less, and free FAXes and email more and more, the Post Office is fighting back by raising the cost of stamps, rather then lowering prices, to attract business. In like fashion, the government -- confronted with falling tax revenues attributable to fall off in consumer spending and business failures -- is planning to step up enforcement of taxes on corporations, Landlords, and contractors.
August 2009 Let’s take a look at the empty half first? We’re far enough along in this recession to seriously examine where we are going and how prepared we are to reach our goals. More to the point, are we certain that those optimistic goals we set a few years ago are still attainable? We in the house business have historically relied upon the combination of easy credit, leverage, appreciation, income, market demand, and tax shelter to create wealth in the form of equity. Is this still valid?
July 2009 At one point in their lives, virtually everybody has played with a YoYo. Basic models simply run down a string until they reach the bottom, then come right back up to where they started. Advanced models run down the string then sit there and spin until a tug on the string brings them back up. These are the models that are the most fun; but which require the most skill to do tricks with. In some ways, house pricing resembles the YoYo. In areas where there has been the least speculation or political manipulation,
June 2009 Most Americans -- especially the media -- think of the housing market in terms of new construction, home sales, falling prices, and loan defaults. TV and radio’s “talking heads”, investment letters, magazines, tabloids, etc. focus on housing bailout programs, reduced interest rates, first-time homeowner incentives, falling equities, upside down homeowners, and rising foreclosures. The billions of dollars aimed at resolving the housing crisis and liquidating “toxic assets” ignore entrepreneurs and private investors. Nobody is bailing them out. They’re going to have to find their own solutions. Single family landlords who invest in houses and/or mobile homes are virtually invisible. Multi-family Landlords always seem to be described as oppressors of tenant-victims who somehow aren’t held accountable for turning decent housing into abandoned slums. Thousands of entrepreneurs who make their livings investing in, renting, financing, or dealing in existing houses are out of sight and out of mind for about 99% of the population and the Federal government. They seem to focus solely upon owner-occupied single-family homes.
May 2009 By dividing my time between Florida and Nevada, I think I lead a charmed life. Both areas were right in the middle of the housing boom as retail values doubled about every three years. And now, both areas are leading the Nation in Foreclosures, Bankruptcies, and falling house values. I can’t believe that I’ve been so lucky. Of course, being lucky could mean that I’ve had more than my share of good luck, or of bad luck. Over a long and checkered career, I can honestly lay claim to both camps; but not during the past housing boom, nor during the current recession. How can that be?
April 2009 If you were drowning 50 feet off shore, a Republican would throw you 25 feet of rope and manual on self-improvement. A Democrat would throw you 400 feet of rope, but forget to hang on to one end. A BILLION dollars seems like a lot of money, but it is only one thousandth of a TRILLION dollars. It’s like trying to pay a $100,000 bill with a $100 check sent to the wrong party. The Bank Bailout and Economic Stimulus Bills were 400’ ropes that won’t do much to solve our underlying economic problems or our trillion dollar credit problem. Consider that TARP money was used by bankers to build up cash reserves or to buy other banks; but not to help distressed homeowners or sellers. The new Stimulus Bill helps Unions and government employees at all levels, but not small businesses, investors, and entrepreneurs. The $billions that government is doling out rewards those who made bad financial decisions. Those who made good decisions will pay the tab. The auto bailout only made car companies into government wards who are already asking for more $billions.
March 2009 Despite the critical role they play in our daily lives, ignorance of money and credit in America is epidemic. Hundreds of millions of Americans apparently expect to go through life without bothering to learn very much about either. Look around you and take note of all the people you encounter on a daily basis who are completely mystified when it comes to budgeting their lifestyle; balancing their checkbooks; calculating the assets needed to retire; estimating their business’ and investment cash flow needs; and calculating the cost of interest on credit cards and mortgages. Judging by my encounters with the general public and the questions asked of financial advisers, nobody seems to be teaching consumers of any age about money and credit. As a consequence, Americans are mired in debt that they can’t seem to amortize; and which is steadily reducing their standards of living and net worth.
February 2009 Each day seems to bring worsening economic news. Despite random flashes of resurgence in the stock market, the current trend is for lower prices. Falling prices mean lower profits. Slimmer profits make businesses scale back expenses; and this leads to higher unemployment and less consumer spending. Rising unemployment leads to more credit defaults and more uncertainty in the financial markets. Without consumer spending, the economy can’t grow new companies and new jobs. The impact of this can readily be seen in the shortage of mortgage credit. Without mortgage credit, there will be no recovery in the overall single family house market in areas where it has tanked. The economy and credit markets can’t recover without a housing recovery.
January 2009 At the beginning of the new millennium just 9 years ago Americans had managed to survive the Y2K meltdown of civilization and eagerly looked forward to another century of progress as leaders of the free world. Then we seemingly lost our way. How? Despite having braved what was widely forecast as a world wide meltdown, 9/11 made us fear the terror that an unseen enemy might bring. The first attack on the American mainland in almost 200 years completely unnerved us, and our government was quick to seize on this to instill fear at every opportunity. It invoked the unseen boogey man that frightens every child in a darkened room by warning that terrorists could be lurking in every dark corner; ready to pounce on us with sneak attacks and “weapons of mass destruction”. As a result, during the past 8 years, Americans have ceded back to the government more of their hard won personal freedoms than they had ever done before in our history; including the dark days following Pearl Harbor; or even the Great Depression.