The current uproar of recriminations over the supposed financial instability of FannieMae and FreddieMac — the two pillars of America’s residential mortgage industry — is designed to obscure the growing problems in the private banks and lending institutions who have made a colossal mess out of our financial system. Its so much easier to take issue with the way the Federal Government has organized the semi-public institutions. And its so unpleasant for business-oriented Republican politicians to admit that the lack of regulation and public oversight in the financial markets has AGAIN led do a massive failure. This one may just dwarf the financial mess that the LAST Bush presidency created.
The fact is that human nature tends to excess. When you can make a gazillion dollars by bending time-honored and respected lending rules, why not bend them a little further and make a billion gazillion dollars, eh? Government in a democratic society is supposed to rein in the excess and even out the greed of human nature. When “small government” Republicans get in power, they throw rules to the wind and pray to the gods of the free market to take care of it. This is the result.
We can at least hope that new rules will be written that will be even more effective than the last. Perhaps that’s too optimistic, but I will always tend toward the healthy balance of rule, regulation and invention. Because my living, my career, my livelihood depends upon this mess getting sorted out and put right, as soon as possible. So does the economic stability of millions of similar middle-class Americans who just want to make sure that they can have access to their deposits and qualify for a mortgage. Its not that much to ask of a government.
One of the issues that will be growing in importance over the next years will be the cost of commuting. In the past, its not been something that most buyers considered as a major concern, but $4 or even $5 gasoline will add significantly to a monthly expenditure and will have to be taken into consideration when a family is moving up or out.
I haven’t seen anyone really talk about the potential for a radical re-shaping of American society and the physical landscape, but imagine an America where the fringe suburbs de-populate as people are forced by their pocketbook to move back closer into the cities that provide their basic employment and social infrastructure. The homebuilders will either see the changes and adjust to rebuilding older city neighborhoods, or focus only on the upper-income segment who can still afford to commute in their Hummers and Expeditions to their gated, golf-oriented communities. In this scenario, a city like Baltimore with significant opportunity for redevelopment inside the city limits can truly prosper, but only with a significant investment in public transportation.
This is also an opportunity to plug a function of charmcityrealestate.com — a cost of commuting calculator that helps factor commuting cost into the purchase decision between two properties. I invite you to play with it, see how it works, and how surprising the comparison now is when driving is factored in. Welcome to a new America.
During the Real Estate Boom of a few years ago, we were constantly bewildered by the consumer’s fixation on the APR of a loan. Seasoned real estate professionals were constantly trying to educate our customers and clients on the fact that the overall interest rate was not the only factor to consider when getting a loan. Given what’s taken place in the last couple of years, with these incredibly low rate loans adjusting into the stratosphere, I wish that more people had taken the advice seriously.
Consumers now are making a similar mistake. This time, they are focusing solely on the price of real estate. Buyers are sitting on the sidelines waiting for the prices to fall, and those that are braving the market are ruthlessly low-bidding on properties that are well-priced just to see how desperate the owners are for a deal — while interest rates have begun to rise.
Those consumers who think that by focusing on the price of the property they are guaranteeing an affordable purchase need to think again. Most experts expect interest rates to continue to rise to the end of the year, and it does not take much interest rate movement to wipe out the perceived savings gained from lowballing a seller. Once again, real estate professionals have to educate their prospects on the dangers of waiting too long. Let’s hope we do a better job this time.
