There is an old idea I have applied to my life: "Do more of what works and less of what doesn't." That has made my life work.
Bail outs and "stimulus plans" don't work. The last stimulus effort by Bush failed miserabley as I predicted it would. Now the financially ignorant Democrats want to repeat "what doesn't work". Isn't this coming close to one of the definitions of insanity? As a realtor, my profession was among the first to see the financial crisis coming three years ago. I came up with a solution and wrote an article about it, then. I published it any where and every where I could. Some people felt that I wasn't protecting myself because others would steal my ideas. I said, I am putting this out there so they can steal my ideas if it makes this economy work and saves us from major economic problems. The plan isn't perfect. It was simply a suggestion for other creative people to take and improve upon. It is still better than the current "bailout programs at the high cost to the tax payers. The article is titled:
My Suggestions to Solve the Economic Problems.
The sky is falling and dooms day is near according to the news media. What has fallen are American home prices, the value of the dollar and the rest of you know what rolled down hill with the declining real estate market. With all the news media is reporting about a soon upon us recession, a yo yo stock market, and the millions of unsold homes in the nation, it creates nothing but public panic and hysteria. It reminds me of the old song, "Where have all the flowers gone?" This one should go "where has all the money gone?" Or should we sing "where have all the qualified buyers gone?" What has increased are foreclosures, builder inventory, and resale houses.
The only dooms day that hit the planet was the crashing of the sub prime market which was inevitable. Now the public is blaming the lenders for the great big economic pit we are in. When I say we, it includes the whole planet. (When America gets into trouble, so does the rest of the world.) Now the lenders are striking back with stricter parameters for buyers to qualify for home loans. This reduces the number of potential buyers while the housing inventory on the market continues to increase. Lenders are eating lots of unwanted vacant standing inventory and collecting no revenue. That puts them in the real estate business. No, No! No!
Is it really dooms day? Are there no creative solutions beyond Bush's exceptionally stupid plan of giving every American earning under $80,000 a year $600? When American economy found itself in quick sand beginning in the early '90's, real estate sales came to a near halt. Interest rates were around 13% in those bad old days. Property values dropped below the dollar amount of the loans on the properties. The news media was reporting then was the sky is falling and dooms day was upon us. Ha! Ha! Something magical happened. The lenders became original thinkers for a change and created short pay mortgage. It was a very simple idea that helped prevent some foreclosures and got the market moving a little. Lenders simply made their choice based upon which was more economically beneficial for them. Would they lose less money in a short pay deal or a foreclosure was their criteria.
Then, the lenders lowered their qualification standards for home loans. They got real creative and came up with all kinds of tricky, clever interest only or choose your payment plan loans. The sub prime market became a feeding frenzy. Good old Greenspan began boldly moving the interest rate digits downward. The first time in almost forty years the interest rates were are low as 5%. Once again real estate was booming. Builders were building and selling first phase homes at very affordable prices. America was, once again saved by real estate. Happy days were here again!
In the shadows of those happy days were the soothsayers and goats chanting; "The bubble is going to burst, the bubble is going to burst, the bubble is going to burst." The optimists just kept on claiming there is no bubble and this is the standard for real estate hence forward. Happy days are here to stay. What happened? The bubble burst! Now, American people are facing one of the toughest economic times since the great depression. (I know, I shouldn't say the "D" word.)
The worst part of the problem today is, the bubble burst with the interest rates already at an historical low. The bubble burst at a time loan qualifying was so easy even a homeless could qualify for a loan. Now housing prices have dropped in some areas by as much as 40%. Housing prices are lower than they have been in the last five years. This means the solutions that used to work to motivate buyers and get the market moving again don't seem to be working in today's current situation. In spite of the recent drops in the interest rates by the Feds, the market continues to remain stagnant.
What now? Why are the buyers not rushing to take advantage of the amazing buyers market with the lowest possible interest rates? Literally, this is the greatest market the buyers are ever going to see. When the market returns with a vengeance, buyers will never again see buying opportunities like there are now!
There are plenty of qualified buyers hiding under the rocks likes eels. The only reason they are not buying now is because they believe if they wait long enough the prices will go down substantially more. Being the clever buyers they consider themselves to be, they are determined to wait it out. It reminds me of the old Mexican stand off. "You go first. No you go first."
This has got to stop! Housing prices are very low, the interest rates are at their lowest, and sellers will negotiate. Good loans are still available. The challenge is to get the qualified buyers off their reclining chairs and into the real estate offices making offers. Since the already low interest rates and housing prices haven't moved them, the lenders will have to go to the next level. What can be done now to get the market moving again? First of all let's first understand, this is a fantastic buyer's market.
The way to get the economy moving again is to stop buyers from waiting for prices to go lower and start buying. Once the real estate market becomes active again, the rest of the economy will follow. The answer to do this can be given in one word; incentives. INCENTIVES! Though the amount, and details will be debated in the lenders' board rooms, here are my suggestions to move the buyers to move the market. Lenders can set up an emergency program offering anywhere from a 5% to 8% rebate on the purchase price of the home to all qualified buyers who buy a home between March 2008 and April 2009. The buyers will receive their rebate two years after the close of escrow providing they have made their monthly payments on time for two years in a row. The lenders could stipulate 5% rebate on all homes $500,000 or more. The lender could vary the rebate on lesser priced homes. For example a $150,000 purchase price might get an 8% rebate and a $300,000 price might get a 6% rebate. While this suggestion is no more than a thumbnail sketch, it is a plan that lenders can use and refine. This plan will motivate buyers to buy now.
This will get the market moving now. This would begin to diminish the excessive amount of vacant standing inventory. Resale houses will begin to sell after the foreclosure inventory is sold. It would begin revenue flow to the lenders again. It would get cash flowing into the American economy again. In two years all the buyers who purchased in 2008 would get a sizable chunk of money to reinvest in a vacation home or some other challenge. The two years the buyers have been paying their mortgages on time would give lenders enough money to pay for the rebate. During these two years, people who are border line qualifiers for home loans would have time to clean up their credit and qualify for a home loan. The beginning of the third year would enjoy the first signs of the return of happy days are here again! People might be singing; "Where have all the houses gone?"
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We The People Congress.org / blog
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