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twitterHomebuyers figure into housing meltdown
Fri, Jul 17, 2009 (3 a.m.)
Sun Topics
Sun Coverage
If society just followed the advice of its grandparents, there wouldn’t be an ongoing crisis with foreclosures that helped trigger the nation’s economic woes, according to the author of a new book.
Shari Olefson, a Tampa, Fla., attorney and author of “Foreclosure Nation: Mortgaging the American Dream,” says simply blaming Wall Street, government regulations or predatory lenders — all who share culpability — is just shifting responsibility away from those who bought the homes.
Our grandparents lived in an era where they had mortgage-burning parties when they paid off their home loans, and everyone in the neighborhood came to watch, Olefson says.
Times have changed, with a greater reliance on credit cards and credit overall, Olefson says. That hasn’t been a good direction for this country, she adds.
“People have access to a lot of money. The average person has bad credit, and there is no problem. We have grown accustomed to credit,” Olefson says. “When you think about it, most of our parents used to sit once a month and write checks to pay the bills. Kids are not seeing that today.”
That is a danger because the further people get away from touching money, the more difficult it is to curb spending, she says.
That happened with this crisis as well. During the run-up of the housing market, people pulled equity out of their homes like a credit card, Olefson says.
The concept for writing the book came, Olefson says, when she was working for First American Title and went to a conference in San Diego in 2006. She heard people talking about the growing number of defaults on home mortgages.
“The idea of the book was to give people more than a sexy sound bite,” Olefson says. “I wanted to give them a whole picture. It sounds like a negative title, but it is not. It is a positive. It is up to us. What I ask is this the kind of country we want to leave for our children?”
Attitudes are changing during this crisis, but not always in a good way, Olefson says. There are people who can afford their homes who are walking away or talking about walking away because they are so far underwater, she says.
“With those attitudes right now, I don’t know what the result will be in the next five to 10 years,” Olefson says. “We are heading farther down the path of a lack of personal (responsibility).”
That doesn’t mean there is no reason not to blame the government, Wall Street and the mortgage industry, Olefson says. Deregulation enabled mortgages to be sold as commodities instead of the traditional method of banks knowing their borrowers.
Greed is a big factor, of course, especially on Wall Street because many assumed that prices would keep going up and that mortgage money would be available, Olefson says. A lot of people made flawed decisions, she says.
But despite all that, it comes down to homebuyers, Olefson says.
“None of this could have happened without our participation,” Olefson says.
Even complaints about predatory lenders and mortgage brokers duping people into obtaining subprime loans shouldn’t be excuses, Olefson says. If it sounds too good to be true, than it is, she adds.
The percentage of buyers who were duped was small, Olefson says. Many saw their friends buy homes and thought they could afford it when they couldn’t, she says.
The problem with foreclosures is they are in an evolving phase because of the recession and growing unemployment, Olefson says. But she says she is concerned about people walking away because they are underwater, and that the government might need to be more aggressive with some type of interest rate reduction to keep them in their homes.
Olefson says she knows people who earn more than $500,000 a year who are talking about walking away from a $2 million home because its value has dropped so sharply. They are angry because they look at their neighbors defaulting on their homes and driving down the property values in the neighborhood, she says.
There can be some good that comes out of the housing and financial crises in the long run, Olefson says. She hopes they makes people think about how they took for granted financial values and what they were teaching their children. None of this is going to happen overnight, and they aren’t going to become their grandparents, she says.
But it means educating themselves about mortgages the next time they buy a home, Olefson says. Many didn’t read the documents and they got lazy about getting information. People will clip coupons and drive to a sale an hour away, but they won’t look at their own credit reports, she says.
Despite the foreclosure woes, there are bright spots in the housing market with the influx of first-time buyers who are taking advantage of affordable prices and an $8,000 federal tax credit, Olefson says. That will help absorb inventory and enable other people to move up to other homes, she says.
“The most important thing to remember is that this will get better at some point,” she says.
In other news:
Scott Kichline, the manager of commercial and business development at McCarran International Airport, will be the guest speaker July 23 at the mid-year Crystal Ball housing forecast at Texas Station. The seminar starts at 8 a.m. and includes Larry Murphy, the president of SalesTraq, who will recap the second quarter housing statistics. He will be joined by housing analyst Steve Bottfeld. For more information on the seminar, go to www.crystalballseminars.com.
Brian Wargo covers real estate and law for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegassun.com.
Discussion: 51 comments so far…
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Locally owned and independent for more than 50 years.
We recently purchased a home here in LV, and own another smaller property that was mostly paid off, but lost so much value that we had to hang on to it and rent it out, which is a "wash". I wanted to slap the lender we were initially dealing with when he had the nads to scold us about not "walking away" from the initial property, which was never a consideration on our part.
Does anyone honor the committment of a contract anymore? It's like the beginning of social anarchy.
People are trying to justify walking away because it doesnt make economic sense. Fact is it is unethical, immoral, and shows a true lack of values and judgement.
Welcome to America. People have been doing all the above for years. These behaviors are not anything new.
lenders and real estate people are to blame here. they knew most of these folks would never make it. vultures, been going on since dawn of time
This article is "horse hockey", as Colonol Potter used to state, regarding residents in Las Vegas who bought a home at boom prices and are now underwater and in dire straits. These buyers had an acceptable job, work history and QUALIFIED for their home through professional lenders.
Las Vegas is a melting pot of people from around the world, with buyers who must rely on help from the broker and lender to fully understand their PITI obligations.
For sure, many couples in Clark County with $12.00 to $15.00 an hour jobs together should not have been able to purchase $200. square foot homes. The entire economic structure and strategy of the Valley was out of whack, starting with overbuilding casino executives, condo-hotel projects, then homebuilders, trickling right on down to first time homebuyers not knowing any better, getting approvals for homes they could not afford to pay for.
MGM Mirage was going to build homes in Primm, teachers were going to commute from Boulder City, wasn't that the talk, as working people were priced out of the Manhattenization of Vegas?
But, there is no excuse, absolutely NONE, for banks, home builders and mortgage lending companies to have profited by preying on those who should not have qualified, who should have been told NO.
Those buyers would have continued to work for three to four more years to build up equity money, and found a better price in the future!
For many homebuyers in Clark County if professionals underwriting the loans had been doing their jobs, fulfilling their professional obligations, then (a) many homes empty today would not have been built, (b) there would be less foreclosures, and (c) property values would not have declined so much.
From the very top in DC, Bush 43 did not listen to concerns. He is now attending baseball games. Phil Gramm is now working for a Swiss bank.
From the top in Nevada the state's gaming regulators should not have signed off on so much hotel room expansion, local authorities should have put out some growth control barriers on land development, but the biggie is lenders failed to do their jobs.
With leadership comes responsibility, both in gaming and government. People didn't perform.
Blame Goldman Sachs, who just turned a 2 billion record profit, after (1) bundling instruments for years, then (2) shorting them for additional profits (!) right before the bust.
Ms. Olefson, start at the top of society and work your way down, to sell a book. You're an attorney, so you know billable hours are real good when things are out of whack in the real world, in particular real estate, which historically represents roughly one third of the country's wealth.
What do you have to say about military families, perhaps with one serving overseas, and the other spouse with dependent(s) at home, stretched, now also underwater on their homes.
Ms. Olefson, it's not about "lazy", it's about too many hands in the pot, top down.
there are no bright spots in market, they claim there are, but people venturing into market now are either idiots or uneducated, the market as at least another 20% to drop..
Gregory
Excellent response.
The issue is more complicated than "irresponsible homebuyers".
Add to your list the corrupted assessors, title companies and real estate brokers who had fingers in the pot as well as county, city and state officials who did not do the job of planning and restricting growth.
Refinanced my mortgage in 2004. No money out, just a lower rate. No problem. Then the C-Wide talking head says "Hey, want another house/mortgage?" I said no, I'm on soc sec. He says- How much do you make? I said 18G a year. 2 minutes later, I'm approved for a $300,000 loan!
The point is that mortgage companies were just like crack dealers. When cops arrest someone for possession, they really want to know who the supplier is. In housing, C-Wide and their ilk were the dealers, sucking in the users. May they all rot in Hell...
ignorance is no excuse; realtors are like politicians; they're only in it for the money. caveat emptor, let the buyer beware. dont they teach ethics or economics in high school anymore? the sheep are getting their clocks cleaned and blaming the very financial institutions they signed a contract with. only in america.
Yes there's more pain to come don't let anyone make you believe that we're anywhere close to a rebound. It's time to get real. Yeah sales are up I'd be buying too if I could get 50 cents on the dollar. That's today what will it be like in 2 years??
Gregory
Excellent response! To the point and telling it like it is (and was).
"local authorities should have put out some growth control barriers on land development"
My friends and I will always believe that palms were greased to get all the building permits that were approved during 2004-2007. IF the average citizen of Las Vegas could see a disaster coming, why couldn't the politicians, the lenders, the builders??? To paraphrase GOrdon Gecko "GREED". There was money to be made and all those people ran with it. North Las Vegas was the worst. Where are those politicians/planning commission honchos/lenders etc. now? I wonder if they all "walked" from their properties or are struggling like everyone else?
When you house became an "investment," it was no longer a home, but just another way to make money. When the house value went up, people like the Tampa woman were making money, banks were making money, agents/brokers were making money, and homeowners were making money. Everybody happy!
When the bubble burst, everyone bailed. The house was a bad investment. When breaking even would take twenty years, it makes sense to dump the investment. But wait, now you have a moral obligation to take this investment to the grave? It is your home, they say. You cannot just walk away. You signed a contract.
If it were an investment in 2005, why is it now a moral obligation in 2009?
/logicfail
There are some serious pretzel logic going on in some people's minds. It is or it is not, but it is not situational depending on your high horse.
Here's what I want to know...if in 1994 we purchased our home for $117,000 and in 1998 during refinancing it was appraised at $124,000 one would assume that was a normal rate of appreciation. So why, in 2007 was it suddenly worth $595,000 with NO major improvements whatsoever!? On paper, we are suddenly sitting with $470,000+ that we wisely did not spend...it wasn't REAL...if only others would have understood...you CANNOT get something for nothing! EVER! Unfortunately, as humans, we are easily induced by our greed and avarice to do stupid things...and now our economy is bearing this out. SO my question is...if the boom economy was built on fairy dust and pixie wings, are we REALLY in a depression or is this just a correction back to the normal growth rate we would have experienced had real estate insanity not taken hold?
"Strategic Default" is a recently well researched economic behavior. Google it. "Buying and Bailing" is another version of it. As time passes, the moral issues of abandoning your home diminish and the economic benefits increase. When this crisis is over, more than one half of all Vegas homeowners will haved pitched their homes to start over. We know this now. No one will be able to say they didn't know it was going to happen. If more of the Vegas' leadership accepted this fact their policies would be different.
I dont blame "Strategic Default" people.
Donald Trump files Bankcrupcy twice. Big corps do it too. It is a necessary evil for some.
What about obligation to your family? Is it fair to impoverish them to furfill some obligation to a bank? Why sacrafice your family for a greedy corporation that needed to be bailout too? You owe more to your kids and spouse than to a credit union.
Why be poor to feel superior?
What a lousy "blaming the victim" attitude. My circumstances were such that I could not wait five years until the housing crash came. (Sorry, can't give personal details about why I needed to buy a house.) My life is a misery now because my house owns me -. I suffer because of the greedy and selfish who drove prices up making loans to people who were not stable and qualified, as I was, and those who bought houses as investments, while I just needed a decent place for my family to live. I will suffer for the rest of my life, and live a crappy existence, with a huge portion of my income going to a house that I can't get out of. No vacations, no meals out, second-hand everything I need to buy, high-mileage cars, no socializing that involves spending any money, trying to do all the repairs myself even though I don't know how, trimming my own trees, and so on. I work a difficult, high-stress job to live a life that is all work and no play, thanks to those who made this happen. This was not my fault, Wargo. I am a responsible person, and haven't intended to walk away, but maybe I should. Being responsible and decent in American society is now a recipe for failure and abuse, and I'm tired of it. Thank you, Gregory, for putting the blame on the pigs who deserve it.
"But, there is no excuse, absolutely NONE, for banks, home builders and mortgage lending companies to have profited by preying on those who should not have qualified, who should have been told NO."
* * *
Telling adults "no" is something we do not do in Las Vegas. If you are looking for a safety net or some "system" to save people from themselves, you have come to the wrong city.
Blaming the mortgage industry for the greed, laziness and ignorance of the individual is like blaming liquor stores for alcoholism or casinos for gambling addiction. "Stated income" loans gave those cash-earners who lie about their taxable income (of which there are, oh, a few in Las Vegas) a path to buy a house without paying their fair share of taxes. Nobody had a problem with the loans then.
Lying about your taxable income is abuse of the system and your fellow taxpaying citizens, but compared to what followed, it was nothing. Soon, those "stated income" (and other non-conforming) mortgages started to be REALLY abused by folks simply lying all around (about their jobs, about their employment status, about their cash flow, about their intent, whatever) just so they could try to cash in on an unsustainable boom.
Which leads one to wonder, why is the "greed" of the companies granting the loans any more morally bankrupt than the greed of those home buyers lying in order to obtain them?
The Las Vegas metropolitan area saw 40+ years of 3-5% annual home appreciation; anyone who thought that 30/40/50% annual appreciation was anything more than a run-up was ignorant or lying to themselves. Some folks placed their bets and won, some placed their bets and lost. And?
Walkaway and you shall pay. All these banks now have foreclosure reclamation departments to chase down people for the difference in what the home sold for and what was owed. You can get out of a second but in Nevada the bank can collect on the difference five years later if they want. True they have 60 days to file for a judgement after the home sells but then they have five years to collect the first wage garnishment or payment. Once they get the first payment the only way to stop them is a full out bankruptcy. Pay now or pay later your gonna pay in the end.
First of all Teacher, no disrespect or blaming intended, but the life you describe "No vacations, no meals out, second-hand everything I need to buy, high-mileage cars, no socializing that involves spending any money, trying to do all the repairs myself even though I don't know how, trimming my own trees, and so on" is the same life my brothers and sisters and I experienced as children of teachers. For much of my married life, that has been our life as I, too, am a teacher. It is the life we've expected as public employees and we've been okay with that and found creative ways in the lean years to deal with it...but my point is...this will turn around. In the meantime,your children are watching and you are setting the best example and providing them with the best educational moments they will EVER receive by doing the right thing and living honorably! It may not feel like it now, but the payoffs for such discipline and steadfastness will come and they will be plentiful when you see the results in the lives of your own kids!
To add to this discussion:
http://newsroom-magazine.com/2009/critic...
realtors are only in it for the money.
wow. that's as bold a statement as "fish can swim".
of COURSE we're in it for the money. we're a business. just like the grocery store, starbucks, the dentist, the strip club, pizza hut, etc.
if you can't afford a house...don't buy one. GROW UP and stop being a liberal and blaming it on a realtor.
we just find home for buyers and sell homes for sellers.
period.
If our grand parents had had the same easy access to easy credit that we have - they would have used it too!
I would say that most, not all, Real Estate sales people, appraisers, brokers, the local MLS and finance people crooked. The entire 6% commission is corupt....I know they will tell you that it's nogotiable, but then they won't show your property if it's less than the 6%. The entire real estate sales circle is incestuous. They are all scratching each others backs. I hope with this last flush out of realtors, etc. that the way homes are purchased will change to a system where they are replaced. Realtors should be paid a flat rate or hourly. They don't earn their money with this ridiculous percentage pay. When houses were doubling, they were getting a 100% raise to sell the same house a few years later. They are the only folks I know that were getting a 100% raise. The MLS is a racket that is closely protected by the NAR or CAR (if you're in CA). Even the govt. thinks the MLS is a racket.
stevem
Its not being a liberal when you buy a house you cannot afford. I know lots of uptight republicans who played that game also.
Its nondenominational. If only liberals played that game this would be a Democrat state and it sure as hell is not.
umm...what is "crooked" or "corrupt" about not showing anything below 6% co-op property?
as a business owner are we not entitled to the right to decide what we want to charge for our services?
if YOU were running a clothing store and the 8 other stores in the mall were selling skirts for $14.00, would you not try to get $15.00 for yours? or maybe $13.00?
uh...if there are 5 other homes in your neighborhood on the market with a 3% buyer rate...and you want to be the guy with the 2% buyer rate...have at it.
you have every right to do that...and we have every right NOT to show your home.
if the seller of a house doesn't think me bringing a buyer to them is worth 3%...that's fine. they don't have to, and i don't have to show their home.
on the flip side of that, if you REALLY wanted to get your house sold, you could offer 4% to the buyer agent and you'd get many more people coming through than if it was 3%, right?
so...if you are free to give out 4% to a buyer agent to get more nibbles...why is it wrong for us NOT to show your home if you offer 2%?
that's free market capitalism.
and don't fool yourselves...if a buyer says "i need a 3 bedroom home in THIS school zone at THIS price"...no agent is going to risk losing that sale over a few hundred dollars on the commission rate.
3% of 150,000 = 4500.
2% of 150,000 = 3000.
am i REALLY going to risk losing 3000 by not showing someone a house that is perfect for them in order to take a chance that a 4500 might be out there?
i'll take the 3000 and be done with it so i can free myself up to find ANOTHER 3000.
oh, and some agents DO HAVE flat rate listings!
realtors can't be paid an hourly rate because they are independent contractors. they aren't employees. if you control the hours a person works or how they use their time, they start to become employees.
do you REALLY want a realtor getting an hourly wage? how is that going to work?
do you want me coming to you saying "i get $10.00 per hour to sell your home." 900 hours later the home isn't sold...and you owe me $9,000?
if you price your house $20,000 higher than any others in your neighborhood, i might never get it sold. you want me "on the clock" for that?
also, if we get 3%...we have to give the broker some of that, sometimes as high as 50%, a lockbox is about $100, a sign is about $100, etc.
hey, you are MORE than welcome to go FSBO.
and so what if home prices went up 20, 50, 100, 400%? that means the price for US to buy a new home has gone up as well. should we not be able to get a cost of living increase by getting a larger dollar amount of commission on higher priced homes?
when they raise the price of hamburgers where you work, do YOU get any increase in your pay?
no...but that would be "fair", right?
so, why is it wrong for us to get that?
it's what the free market will bear. can't afford a porsche? don't buy one, but don't say porsche is corrupt or crooked for charging what they can for their car.
The author should consult the FBI Mortgage Fraud website.
There are nearly 3,000 investigations into mortgage fraud. Several hundred convictions have occurred. So let's get real. People were sold a bill of goods that many loan originators knew could not be paid when rates adjusted. It was hard sell at its best. Let's hope they all serve time.
Homebuyers who did have the means to pay the mortgage were lied to by the appraisers. The realtors and appraisers made money hand over fist during the boom times and get to keep their ill-gotten gains. CEOs make bad decisions for a company, make their millions of dollars, and get to walk away even if they left their company in a mess. Surrounded by immoral people, I would be mad as hell that these people to expect them to live up to moral standards they have no intention to live up to. As far as I am concerned, if I was lied to I don't see how I am morally obligated to follow through. Iif were sitting on a home with a value half of the mortgage I would walk away. I predict this is what will eventually happen in LV.
Don't believe a word that NV2009 writes. He is an ignorant dope. No bank is going to sue you for the difference between your mortgage balance and the eventual sale price. Never. Costs too much, they just want to get rid of the house. And they will. Plus the IRS is prohibited from doing anything about it, too. Stupid LV2009 has some pathetic agenda that has no basis in fact. Go back in your rathole, you fool.
Homebuyers can blame anyone they want to, but as far as I know know one was ever forced to buy a home, or take out an ARM.
Buying a home is largest financial decsision most people will make in their lives. If people would have done the due diligence, most of them would not have gotten themselves into these situations they are in now.
There should be civil and criminal penalties for anyone who backs out of their legal commitment and walks away from their home loan contract.
Imagine our society if everyone could break contracts when some condition arise that wasnt to their favor.
To stevem,
I appreciate your desire to avoid any culpability in the housing mess that we are currently embroiled, but I must point out one act that every Realtor I've ever met is guilty of committing during a real estate transaction. Realtors ALWAYS give their opinion to the buyer about whether or not the buyer is paying a fair price on the house. I would also estimate that in every consumated sales transaction, a Realtor responded in the affirmative that the buyer was in fact getting a fair deal. I know it is against the Realtor's code of ethics to offer such an opinion, but I have never met one who doesn't. As a result, Realtor's in a sense put a stamp of approval on every house that was sold during the boom years and played a part in creating a sense of urgency to purchase that ultimately led to buyers paying way more for a house than it was worth.
So although you would like to wash your hands of this current crisis, most rational people know that you were part of the problem. All Realtors should be forced to wear a scarlet letter R on their foreheads to remind them of the mess they helped create.
nednougat,
Could you back that up with some links. I think banks would not have pursued getting cash out of a foreclosure until now when they lose 100K on the deal. I've always heard the IRS taxes a "debt forgiveness", so losing 100K on a house to foreclosure still means a 30K tax bill.
And I think banks would suck everyone dry if they could, with a big smile on their face and a thank you very much, just to pick up a few dollars.
SlumpDog, in 2007, Congress passed a bill that stops the IRS from taxing the difference between the mortgage balance and the actual sales price. Because if you walk away from a home worth say 200 G and the bank sells it for 100 G, you had no influence in the sales price. Right? So why would you be liable for the difference? Dopes like LV2009 are mumbling fools.
Congress passed the 'Mortgage Forgiveness Debt Relief Act of 2007'. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
wait...you're a grown adult...about to make a major purchase and you ask ME if you are paying a "fair price"?
huh?
uhhh...yes, you are paying a fair price you know why?
because based on all the other homes you looked at, and all the prices of those homes...
THIS home is the one you picked.
so, THAT is the fair price.
if you walked into burger king tomorrow and a whopper was $17.00 you'd have a choice to make...
if you thought that yummy, juicy burger was worth $17.00...you'd buy it...and that would be the fair price.
OR...
you could say "forget it" and go across the street to wendy's and pay $1.99 for a burger.
at that point the WENDY'S burger would be the "fair market value" for YOUR market.
did you guys sleep through 10th grade economics?
now, if enough people didn't buy the $17.00 whopper at burger king and instead went over to wendy's, burger king would either have to lower their price OR they would never sell any burger and go out of business.
that's essentially what nearly happened to starbucks. they raised their prices right at the very beginning of the recession when gas prices were high.
would you go to your call your boss on your lunch break and say "look, they are charging $1.99 for a wendy's hamburger. do you think that's a fair price?"
no, because you're a grown adult. you don't need and SHOULDN'T need someone else to tell you the "fair price" of something.
the computer you are typing your moronic response to this posting on, the bong you've been smoking, the birkenstocks you are wearing, etc. you paid the "fair price" for or you wouldn't have bought them.
i'd love to have the new "robot" les paul guitar from gibson...but at $5,000 i think it's a freaking rip-off.
but, if i go in and buy it at guitar center...is that guitar center's "fault" that it's $5,000?
am i getting ripped-off?
nope. because i CHOSE to buy it.
did guitar center do something unethical or illegal by selling it for that price?
of course not.
realtors are no different.
stevem,
Face the facts, you pumped up the real estate market so that your buyers would feel a sense of urgency to purchase a home. You can try all you want to distance yourself from any blame, but you will fail. You and your Realtor friends can stick together and proclaim your innocence, but everyone outside of the industry knows the truth and they all blame you to some extent. Just for the record, I did not overpay for my house that I purchased in 1999 for $153,000 for 2000 square feet in Summerlin. Nonetheless, I did witness firsthand how the industry as a whole did a pump-and-dump number on unsuspecting buyers during the boom years.
Good luck in your attempts to convince yourself into thinking that you played no roll in creating this mess. If you say it enough times you will eventually believe it to be true.
nednougat,
Why do you say that it costs too much for a bank to come after people whose property they acquired by foreclosure? Some of these houses will sell for hundreds of thousands of dollars less than the amount of the unpaid mortgage. There is no way it will cost the bank that much to secure a deficiency judgment against the mortgagee. Plus, banks as a whole might decide to seek deficiency judgments as a scare tactic to disuade others from trying to walk away from their mortgage.
RE: Steve M
I'll get you off the hook, as someone whose immediate family has over 125 years of real estate broker experience among just three of them.
Real Estate Agents list, market and show property, with full disclosures. It is the LENDER who is responsible to say NO when the prospective homebuyer-applicant is going through the underwriting process.
But, there is not a broker worth his yard signs who would not walk away from some of the closings in Nevada during the boom prices and not quietly think to themselves, "whew, hard to believe."
Experienced agents do know value and cycles in the market. They understand rational mortgage-equity ratios, construction costs, GRMs, the huge problems with ARMS and upgrade money, and what a property of any use-type should bear in the market over 10-30 years based on it's functional utility.
But, you are correct, it is not the agent's responsibility-fault if someone looks at the listed property and can locate the financing. Typically, the agent represents the seller.
Clark County had long sustained growth well over a decade based on a flawed economic model, adding hotel rooms and service jobs without corresponding growth in income levels, education, healthcare offerings and job diversity. Many buyers acted were urgent in purchasing, if they could get approved, as they felt more resort and condo construction would effectively price them out of the home market for a long time. That was a bad choice on a large purchase.
It should also be stated that the night club business explosion, weeks like the NBA All Star Game, and some other types of bookings to attract new, young money brought new residents and visitors to town who brought a lot more riff raff to condo and apt communities. Parents, especially, felt they needed to buy and find a safer, quieter place to live with less adult influence.
Local media, the BCI, some gaming companies, and the regular ones that the local media go to for statistical quotes only fueled the urgency to "buy before it's too high".
For the author to suggest people were "lazy", or "something for nothing" in buying behavior, certainly given the variables present in Clark County, is not only insensitive, it's wrong.
I agree with Katie. The housing market became a path to income instead of a way to purchase shelter. Demand increased, prices inflated above reasonable levels setting the stage for an adjustment. Gordon Gecko would have loved the ride up. Now the people who simply purchased a house to live in must pay an inflated mortgage. Capitalist is great but there are bad side affects to free enterprise. You can forget about government stepping in, this is Nevada for God's sake. Libertarian capital of the USA.
"Capitalist is great but there are bad side affects to free enterprise."
We do not have a pure capitalist system nor we will have one.
It was government intervention that probably caused the housing bubble then burst problem.
First, the Federal Banking System is not based on capitalism. They have the privilege of printing money out of thin air and then lending to people. If the government decides that they should lend more money then they open the flood gates to allow them to print more money to lend to people. Clinton appointees to the FRB set interest rates to the lowest levels in the history of the USA which greatly added to the housing bubble.
Second, from Jimmy Carter to GWB, all the Presidents (especially Clinton and GWB) were placing ungodly pressures on lending instutions to lower their lending standards so that minorities could get homes. This added greatly to the housing bubble, too.
Third, there is a quasi-government agency which primary purpose is to purchase high risk mortgages and then package and resell them into the market place if possible. Starting with Clinton and then with GWB, they pressured this agency to lower their standards and buy more risky mortgages. This added greatly to the housing bubble, too.
Fourth, there is greed. There was greed on the part of the lenders, housing builders and real estate spectulators. There was also greed on part of the housing buyers. Some were getting 2nd mortgages to get the excessive "equity". Other buyers were buying homes that was beyond their means. Some were even lying about their income on their applications.
It is not a perfect system but it is much better then what they have in Europe. On average, a USA citizen's home is bigger than a European's home. In commumism, people lived in crowded homes or in ugly boxed high rises.
so, i guess when you finally sell that home in summerlin and make a profit...will you "blame" us realtors for that as well?
if we are able to "pump up values"...then we are directly responsible when any of you sell a house and make a profit, correct?
you can't have it both way, folks.
you can't be morons and take the totally uneducated stance that realtors have something to do with the price of homes ( gee...i wonder if the rise in home values had ANYTHING at all to do with the construction boom on the strip? ) when you are trying to BUY a home...then sit back and not give us that same credit when any home sells in this town for a profit.
how does a realtor "pump up" the price of homes? that doesn't even make sense.
it is not my job to financially "size up" someone that comes to an open house, or calls me off one of my signs, or i meet from a referral.
i am a real estate agent. NOT a lender.
there is NOTHING in the conditions of my license that requires me or instructs me to do that.
i am only responsible for the transaction of THE PROPERTY.
i ONLY work with pre-qualified buyers. period.
if YOU fudge on your application, or your LENDER fudges a few things and says you can afford a $200,000 home and you really can only afford a $150,000 home...that's not my problem.
if 8 months later, you lose your home...sorry, that sucks.
not my problem.
if you come in my gun store and buy a gun, then go rob a grocery store...wow, that sucks.
not my problem.
if you don't want to work with a realtor, hey, that's cool.
DON'T.
but if you do...grow a pair and take some personal responsibility. i'm not your mom.
While there are some circumstances that cause good, honorable people to lose their houses. Simply being "upside down" on your mortgage isn't reason to walk away withouut consequences. Records should be kept, and anyone walking away should have to repay before EVER getting another mortgage. Teacher has it right, working hard and giving up other things to honor the mortgage they signed. It is tough, but in 5 or 10 years they can know they did it (unfortunately while watching others who didn't pay their obligations ending up better off with no consequences). I got laughed at in the face by former neighbors who "got out of this neighborhood" and bought high priced houses elsewhere. Many of them are crying the blues because they have lost their house or will be soon. I tell them my $900 payments are very managable. Why should those of us who "stayed in the old neighborhood" have to pay for the irresponsibility of those who bought above their means. If a lender wants to give interest rate cuts or extend the length of the loan to help a good customer who is having hard times get through, I'm all for it. But they should have to pay 100% of the principal loan amount. Yes there were predatory lendors, but those taking those loans were fools for not reading the details.
Gregory made the statement:
"Clark County had long sustained growth well over a decade based on a flawed economic model, adding hotel rooms and service jobs without corresponding growth in income levels, education, healthcare offerings and job diversity."
Just what is the "flawed economic model" to which you refer? It cannot possibly be adding hotel rooms and service jobs without corresponding growth in education, health care and job diversity, for that is the economic model that sustained Las Vegas for 100 years (income levels are another story).
Over its entire history as a tourist destination, the Las Vegas metropolitan area has had a (roughly) 25-to-1 ratio of annual visitors-to-residents. That number is historically sustainable. When population growth outstrips the visitor numbers, there is less wealth to go around locally, just as when visitor numbers decline, there is less wealth to go around. So, people move away. That's how it works.
Now, if you mean the housing run-up itself was the "flawed economic model," and leave off your other coattailed agenda (income levels, education, health care and job diversity blahblahblah), I might find your theory plausible.
By the way, SteveM, I rarely agree with you, but you are 100-percent correct in your comments on this particular story. Don't get used to it.
"It was government intervention that probably caused the housing bubble then burst problem." Sgt Rock. The John Birch School of Economics needs to update it courses. Adam Smith is rolling over in his grave with Sarge's wisdom!!!!!
Reply: Mr. Reza
Respectfully, making jobs is like making babies, you have to have something of sustaining value around them.
Everybody wants to have a baby, nobody wants to raise a child. There's a lot of truth in that today in American homes. But, as an economic metaphor for Vegas, every gaming corporation and close support vendor (such as liquor supply) wants to make big profits, but, ah, to create a sustainable place to live for all, beyond decades of relying on just one job, just one place to work, "even for a 100 years", there lies the true parental problem for Clark County.
Put another way, you cannot have two million children and not add a few more parents. :)
I wonder if Adam Smith would have classified these items as part of true capitialism or not.
- Federal Banking System that artificially made interest rates to be extremely low
- Government putting pressure on banks and lending systems to lower their lending standards
- A government/private quasi corporation that is heavily pressured to buy high risk mortgages
Hmmmmm......I wonder.......
Sgt. If you don't like it, it must be a conspiracy. If there are groups working to control all monetary FED and banking actions , don't you think might find out. Oh they are in on it too. Crazy!!!!!
I am not sure what you are talking about.
You do know that there is FRB which is empowered to influence interest rates and money supply.
You do know that the Feds regulate banking and lending and Wall Street. In Clinton's last year in office, he signed bills that relaxed all that regulations.
You do know that there exists quasi government corporations, like Fannie Mae and Freddie Mac, who main charge is to buy risky mortgages so that poor peole can buy homes.
Of course, you know all about those things.
It is not a conspiracy. That is just plain regular government in action which is your hard earn dollars at work. Of which, they wanted every Tom, Dick and Jane to own a home which helped create a hugh housing bubble that naturally went bust because one can only defy the laws of economics for only so long.