Real Estate in the 21st Century

Here is a great reason why we need to get up early and start our days.   I am hoping to start building a clients home at this beautiful place in the next month.  These photos were taken about 8:00 am.  We are above the cloud cover and in the distance you can see Beech Mountain, one of th area's ski resorts. 

Puts things in perspective doesn't ?

This is a reprint of an email sent to me by my good friend Doug Lambe of High Bluff Realty. 

The next time you hear a politician use the
word 'billion' in a casual manner, think about
whether you want the 'politicians' spending
YOUR tax money.

A billion is a difficult number to comprehend,
but one advertising agency did a good job of
putting that figure into some perspective in
one of it's releases.

A

A billion seconds ago it was 1959.

B

A billion minutes ago Jesus was alive.

C

A billion hours ago our ancestors were
living in the Stone Age.

D

A billion days ago no-one walked on the earth on two feet.

E.

A billion dollars ago was only

8 hours and 20 minutes,

at the rate our government

is spending it.



While this thought is still fresh in our brain...

let's take a look at New Orleans ...

It's amazing what you can learn with some simple division.



Louisiana Senator,

Mary Landrieu (D)

is presently asking Congress for

250  BILLION DOLLARS

to rebuild New Orleans .  Interesting number...

what does it mean?

A

Well... if you are one of the 484,674 residents of  New Orleans

(every man, woman, and child)

you each get $516,528.

B.

Or... if you have one of the 188,251 homes in
New Orleans , your home gets  $1,329,787.

C

Or... if you are a family of four...

your family gets  $2,066,012.

Washington, D. C



< HELLO! >

Are all your calculators broken??

Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Tax
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Service charge taxes
Social Security Tax
Road Usage Tax (Truckers)
Sales Taxes
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Tax
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Non-recurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

STILL THINK THIS IS FUNNY?

Not one of these taxes existed 100 years ago...
and our nation was the most prosperous in the world.

We had absolutely no national debt...

We had the largest middle class in the world...

and Mom stayed home to raise the kids

What happened?

Can you spell 'politicians!'

As someone who has seen a number of economic ups and downs over the past few years, this downturn is the worst I've seen.   It continues the rise of government regulations and fees.   The state of North Carolina has now enacted additional regulations on mortgage brokers and I predict it will be the straw that breaks the camels back. 

 Starting on October 1^st 2008

 Yield Spread Premiums will not be permitted on sub-prime loans- if the customer only qualifies for that type of loan, the broker will be limited to up front fees.  Closing costs must increase for the customer, possibly halting the transaction.  Of course the broker could take less fees, many will, but expenses remain the same.  The net effect is government putting a limit on income.  Not very good policy is it?

 Clarifies that principal and branch offices cannot be located in personal residences- How would you feel as a Realtor if you had to go out and rent a commercial space and incur the additional costs, even if your business model or situation did not require it?  This will drive out competition and increase costs to consumers.  Does this make brokers more professional?

 Requires additional pre-licensing education and a credit score of 600.  Would you qualify?

 All brokers must maintain a net worth of $25,000 and at least $10,000 in liquid assets at all times?  Now it is getting expensive to operate and maintain the business-especially in an economic downturn.  And again, does this make them more professional.

 Increase the number of quarterly reports on origination activity and additional filings.  Bureaucratic nonsense that helps no one.

 So, how would you feel if the government told you that it would limit your income, force you into keeping liquid assets in your business even if your accountant says no or face revocation of your license,  be in violation if your credit is blemished, and keep you filing reports that literally mean nothing to most practitioners?

 This is going to drive many good and honest people out of the mortgage business.  People that have never ever originated sub-prime loans.  The banks have won another battle to close down another competitor.  They were able to shut down the Savings and Loan industry in the 80's and now will get back all the business that they lost to mortgage brokers.  They lost that business because they were too expensive, unresponsive to customer needs, and arrogant in their power.  Most consumers will now pay more for their mortgage, will not be able to shop their mortgage for better fees and rates, and ultimately be at the mercy of the banking machine.  As Realtors we already know what type of business model banks have in dealing with REO property.  More of the same is coming.

Let's look at the past 50 years.  Banks have reduced standards for qualifying for a mortgage loan to the point where there is was a minimal amount of funds needed to get into a home.  In years past, 15 to 20 percent down payment was needed to qualify.  The slow reduction in down payment amounts has corresponded to the rise in credit card use.  Why would you want to get 7% or so on a mortgage when upwards to 30% can be achieved?   The banks realize that a person with a mortgage is more likely to pay their bills, or even borrow more money.  Our bankruptcy laws, lending protection laws have been gutted to basically allow the banks free rein to take the wealth of the nation's citizens.  Big government has worked closely with the banks to fuel its increase in size and need for more taxes.   The government uses outdated inflation models to describe the nature of the economy, the fed allows banks to borrow at unreasonable and unprofitable rates and big business continues to pour money into our elected official's coffers to promote its interests.  

The savings and loan failure in the 80's allowed the banks to take assets at pennies on the dollar.  Bank of America is buying Merrill Lynch for pennies on the dollar.  Sound familiar?  Government is bailing out the financial industry-despite the fact that most Americans would disagree.  Banks not only now have the power, but congressional backing to do what ever they want.  

So how does this equate to Realtors becoming dinosaurs?  Let's look at some basic facts.  In the next few years, 75 million Americans will be able to retire.  They no longer will consume the same products and services as they did when they were working.   Health care, elderly housing may be some areas that benefit, but in reality, most retirees will want to slow down in their purchases.   Now, unless the government has 75 million people stashed away somewhere,(it is trying really hard with illegal aliens) we will have a glut of homes in America.  Unless there is a tremendous relaxation of credit standards, most new consumers will not be able to afford homes.  One side note, we are seeing a tightening of standards which of course, ultimately reduces the prices of homes.  

In my area, some savings and loans are already practicing real estate.  With the purchase of Merrill Lynch, the last vestiges of the Glass Seagall Act, which separates banks from Wall Street has been torn down.  Why would we as Realtors not want to see at least the possibility that we will become paid employees of banks? 

We operate as independent contractors.  We cannot survive long term, just like Merrill Lynch.

In our own ranks, we are proposing that banks retain agents in-house to handle their REO property, thinking that it will only help us.  Why wouldn't an expansion of their operations be seen as a normal extension of business growth? 

We are in uncharted territories in America.  Our government is moving more to the side of socialism and in that type of government, you either work for the government or the favored businesses.

Maybe this is the future, you walk into a bank and talk with the loan officer about a mortgage, he pulls your credit, explains that you are qualified and directs you down the hall to Bank of America, Wachovia, Wells Fargo "Housing" officer.  They will have the MLS, a qualified buyer and what seller will care if they work with that combination?  Outraged?  Save your breath, the banks will have already told congress that they are saving the customer from fees and stress.  Think our organization is going to save the day?  Forget it, it is going to be much smaller and less powerful and  will ultimately become part of the problem-it is a lobby group after all.  Want to list property with the bank?  Consumers can get loss leader type fees, and won't have to charge the same commissions like Realtors do.   

Disagree?  I bet you will see headlines like this:

"Bank of America enters into MLS agreement citing better customer service."

"Coldwell Banker/Wells Fargo Partnership creates new real estate company."

"NAR promotes new designation, "Bank Housing Agent"

"FHA,VA requires all agents to be approved before allowing transactions"

"Fannie Mae hires employee agents to help with foreclosed properties."

"Nationwide MLS helps with Wells Fargo Relocation Service"

Just a few that may occur.  The money changers were kicked out of the temple for a reason.

Today marks the anniversary of September 11th, 2001, a day when our country was attacked by those that would disagree with our way of life.  The people of America, outraged at brutal display of terrorism, responded by removing a government that supported those responsible.  Time has moved forward and our Congress and presidential hopefuls debate as to how America should view and be viewed by the world.  Citizens are left confused by the massive amount of noise coming from Washington and the media.  But we should not forget the simple truths that now make up our world.

The men who took control of the planes on 9/11 did so because of an engrained religious zealotry, thinking in general, that they and they alone walked the path to God.  No one, no man, no woman, no child would sway them from their beliefs.  And nowhere in our country can that be condoned.  Our founding fathers created the Constitution to protect the individual rights of America's citizens and we have taken those rights and built the best country in the world.  Those that would simply remove those rights, such as the terrorists of 9/11, seek to do so for personal gain.  They are not martyrs.  Living in the centuries past will not work for a civilized population.  Why did they attack us?  Violence does not take the place of discourse.

For those that state the world hates us.  Ask those Europeans that survived Hitler, those that walked out of East Berlin when the wall fell. Ask those in Southern Asia that were saved from the brutality of Japan's incursions into their countries.  To those that believe that hate and violence will not come to their door?  Who are you going to call? We have stood as a country ready to support, feed and defend almost every other country in the world and we continue to do so.  That is what freedom is all about.

I am not ashamed of my country. Nor am I ashamed at my countries actions. The United States of America is still the beacon of light that shines on the free world.  And if that beacon ever goes out, God have mercy on the world.

I just received my talking points from the president of my local association.  The email was about the takeover of Fannie Mae and Freddie Mac.

1.  The NAR fully supports the action of the Treasury.

2.Interests rates will drop because of the action

3.The new president and congress will be responsible for the reorganization and the NAR is already working on a plan to help shape the process.

4. The action makes clear that the government will not let the financial conditons of the GSE's disrupt the flow of capital to the housing sector.

What do you guys think?

Yesterday the voters of Yadkin County voted no to a number of alcohol related referendums.  With approx. 57% voting down the measures that would have allowed for alcohol sales and the establishment of an ABC store in the county, opponentscited that alcohol would hurt families and many did not approve of its use.  The supporters of the measures, which included the business community and the Chamber of Commerce used as their platform the measures would help economic growth by bringing in more restaurants, entertainment, etc.  The measure continue to be a hot spot in the county and will certainly be brought up again.

Most people now know that the federal government has stepped in and taken control of the mortgage entities Fannie Mae and Freddie Mac.  What is not known is the results that will come from this action.  Many US banks will be forced to write downt their immediate holdings of preferred and common stock of the two giants in that the stock is now worthless.  The government takes on the debt and will have to issue a few billion in debt to prop up the entities.  Since the government will need to prove to investors that it has a good handle on the problem, interest rates will rise to cover the cost of the bailout.  Other world institutions will then have to change their stances on how they look at US  debt and investments.  Also, many banks will fail, now that they no longer will have access to the liquidity of Fannie and Freddie, 

So here is the bottom line.

The public just got more in debt, with a possible doubling of the national debt.

Interest rates will rise.

The dollar will be supported by those rates

Banks will continue to shore up their bottom lines by hoarding cash and will continue to borrow short term at literally no interest from the Federal Reserve window.

Lending on speculative projects will grind to a halt.  Areas that are overbuilt will continue to be hurt by  lower prices, foreclosures, and defaults.

The government now is the owner of your home if you have a government mortgage.  It will set the conditions of which you keep or refinance your home.  By its actions, you may find that your home is worth less only because the government takes a particular stance in your neighborhood or town.  Conversely, you may see higher prices if your area is favored by Congress and is politically correct.

Investment firms like Lehmann Brothers have found a place to get rid of their bad debt.  After the transfer of the debt, they will buy back the "good" debt after it has been washed by the government and make massive profits.

There will be continued consolidation in the banking and mortgage industry.  Thousands more will lose their jobs.  Realtors will lose too.

All in all, not something that the American public needs.

The federal government announced today that is was taking control of mortgage entities Fannie Mae and Freddie Mac.  The ailing companies have lost most of their value since the downturn of the real estate market.  The government will now need to sell debt to shore up the two companies and to provide capital to the companies bottom lines.  Since the announcement, stock prices have risen and it looks like the markets are viewing this as a favorable event. 

What you need to know:  The government now owns a lot of people's houses.  That flies in the face of our constitution and the right to own property.  An argument could be made that it was the government that started the problem in the first place by reducing the restrictions on banks and the GSEs  as it pertains to mortgage loans.   The government, especially during the Clinton administration pushed for a sweeping increase in housing ownership and the Bush administration continued the action.  Republicans in Congress have been sidetracked by Democrats in promoting legislation that would but restrictions on what the mortgage giants can do. 

The common shareholders will lose out.  Since many mutual funds, life policies, etc. have as part of their safe portfolio the stocks of both Fannie and Freddie, those people will  see value being stripped from their accounts.  Preferred shareholders will be taken care of.  So, all in all another bailout for Wall Street, another debt for the government and more misery for the average citizen.

This weekend marks the beginning of the NFL football season.  That means fun and heartbreak as your favorite teams go on the road to the Super Bowl.  Just to get you feeling good, think about bowls of chili and beer, with friends watching a great afternoon of football- and its cold outside and no open houses.  I can't wait!