You have to feel sorry for Ben Bernanke… He finds himself in the unenviable position of following one of the most well-known and (still) respected Fed Chairmen in the history of the organization. But you especially have to sympathize when the aforementioned Wise Old Man criticizes you in public.
A recent headline in the Wall Street Journal — page one, above the fold — said it all. “Greenspan Sees Bottom in Housing, Criticizes Bailout.” Ouch.
Now, I’m pleased that someone of Mr. Greenspan’s reputation sees the end of this coming in the next few months — actually sometime in the first half of 2009. (I think Baltimore is in the process of seeing it now, but that’s just my opinion.)
The real knife in the back came later in the article where Mr. Greenspan takes issue with the entire Fed-backed, Treasury-backed bailout of Bear Stearns and Freddie and Fannie. The two mortgage giants, the Government Sponsored Entities (GSEs) Fredde Mac and Fannie Mae, should have been nationalized, he argues. Shareholders should have been wiped out, assets taken over, and their function split up into as many as ten separate entities and then sold off to individual investors.
Ya know, at this point, I don’t think that TOTAL reliance on the private marketplace would reassure ANYONE. After all… wasn’t it the private marketplace that got us IN to this mess in the beginning?
If you’ve noticed that the rental market seems to be tightening, you’re right on the money.
In a survey taken by the National Multi Housing Council (as reported in The Real Estate Professional, a trade magazine), the owners of the nation’s largest apartment buildings are confirming that occupancy rates remain high and that the number of tenants moving out to become homeowners is very low. More than 80% reported a significant decrease in the number of renters leaving to purchase their own home.
But the number of tenants moving from investor-owned properties into larger professionally managed buildings has increased, most likely because of rising foreclosure rates on investor-owned buildings.
Obviously, for the housing market, this isn’t good news. New homeowners coming into the market are the ones that allow current homeowners to sell and move up, setting off the domino chain reaction into bigger and more expensive houses. Government policy makers who are looking for ways to shore up housing need to take a look at this statistic and work on encouraging the renters to take the leap.
You have to wonder if the American public has truly entered a post-reality era… maybe all the fake reality shows on television have finally had their mind numbing effects, proving to anyone who was paying attention that reality isn’t and it is all based on your attitude.
That’s about the only conclusion you can draw from the result of a recent poll by Harris Interactive, commissioned by our old friends at Zillow.com. They got answers from 1,361 homeowners across the country, and (as reported in a recent Wall Street Journal) a whopping 62% of the respondents thought that the value of their home had actually increased in the previous 12 months.
That’s right. INCREASED.
Never mind that Zillow’s own terribly flawed and unreliable data (see one of our previous posts) shows that 77% of all homes in the US depreciated in value over the same time period. The poll was conducted between June 30 and July 2, 2008, so maybe people’s brains were just overheated from hot summer weather. But 56% of the respondents also said that they would be spending money to improve their “more valuable” properties over the next six months.
The “can’t happen to me” psychosis gets even deeper when you probe the public attitude toward the foreclosure crisis. Even though 90% of the respondents knew that foreclosures were occurring in their local market and 80% felt that the rate of foreclosures would remain steady over the next six months… a full 48% of them opposed government efforts to assist such homeowners to stay in their homes.
What should those of us in the industry make out of such “Twilight Zone” attitudes? We will have to try harder to educate potential Sellers, and perhaps take them on preview tours of the competition to fight the idea that their property is the “best in the neighborhood.” Like addicts coming off of a pretty good high, homeowners still aren’t ready to go “cold turkey” and realize that real estate investments sometimes go down. Including their own. We can either support their addiction and continue to list properties at unrealistic prices, or be the ones to stage an intervention and tell them the truth.
I think our Code of Ethics compels us to be the truthteller.