• Sell Your House

    Email Print
    Share

    I
    remember the 1992 and 1996 presidential elections well. 1992’s brought
    to the forefront the national debt in a way that hadn’t been done
    before. Perot explained what was going to happen when all of those
    short-term debts of the US government came due. The doubt that the
    debt would be bought again at an interest rate that could ever be
    paid back was real. I remember even earlier when I was working
    with the offices of Arizona’s US Senator Dennis DeConcinni (I was
    trying to get import duty data out of the government for
    my father’s company to determine where the best port to ship his
    product to Europe was and it sent me on a trail to where I am now)
    I remember getting help over the months in my efforts from a man
    named Tim Carlsguard. Tim eventually became the senator’s right
    arm on the Senate intelligence committee and he and I exchanged
    many phone conversations and gave each other our individual perspective.
    I remember one conversation where he was very… "scared"
    is the best word. He was relaying to me the amount of Treasury Bonds
    that had to be sold in order to just keep up with the interest on
    the US Debt and that no one was buying them. I think he said 10
    billion a month needed to be raised just to keep current and that
    to get the debt financed they were having to pay 8.5% and that this
    was long term certain death for the American economy etc. (This
    was late 1989 to about the summer of 1990 I think. Those of you
    with access to such records can take a look to see what the interest
    rates were that we were financing our national debt with and please
    remind me).

    In
    the 1996 presidential campaign I remember the Rick Tompkins campaign
    was approached by some Harry Browne supporters asking that we not
    scare the Wall Street types from donating to a Browne Libertarian
    campaign by being so high profile on our belief that the debt "reckoning"
    was coming, and why. For libertarians to be seen as critics of the
    way things were being done would mean that they were not going to
    get any cash from those involved in doing it, Oh My God!  This
    was but one more sign of the separation of libertarians from
    Libertarians.

    I
    see the family home market (and real estate in general) as the buffer
    for economic instability over longer periods of time and I think
    the Federal Reserve does too. When they need a big push of
    dollars into the economy one of the effective ways to do just that
    is to lower the interest rates to a point that lots of money is
    being spent by everyone they can get to take out a loan or refinance.
    Consumer debt in this country is at amazing levels and the lure
    of rolling it all into a home’s equity at an interest rate several
    times smaller than what you are paying otherwise is very compelling
    when your spouse’s job is teetering on the edge.

    Then
    you have households that are able to drag out the inevitable for
    as much as another year living on credit cards and the remaining
    equity in their home. The economy continues to languish and Pow,
    you're upside down in your mortgage and there are too few buyers
    in the market to even make your losses bearable. The banks can be
    held off for several months with tales of BS, but the signs of these
    kinds of leaks just foretell the flood of real estate going back
    to the banks.

    This
    process takes about 2–3 years on average I think and we are
    at least halfway there. All of the short-term blips that are created
    with minor and major efforts of the government and their supporting
    entities have little effect on the ultimate outcome. I saw the same
    thing happen in the late 80’s and early 90’s here in Arizona where
    the real estate market has generally been hotter than elsewhere
    around the country. I see the same thing happening again. New builders
    are doing everything they can to just get them sold to any warm
    body that’ll take them.

    It
    reminds me of a project about 35 miles southwest of Phoenix called
    Estrella. It was a luxury project of Charles Keating (of the S&L
    scandals – one of his and many other’s such projects). Keating had
    begun development of a high-end housing development up against some
    very lovely mountains near Phoenix. Sales were not what they had
    hoped in the economy of the late 80’s but they had an edge. With
    the S&Ls deregulated (while still being federally insured) the
    taxpayers and the country as a whole was about to get nailed. Keating
    was also the head of Lincoln Savings and Loan. Any warm body that
    showed up to the Estrella development was approved for a loan by
    their own little S&L. Hell, they were selling many lots to people
    that were just speculating and had no way of covering the debt should
    the market go soft,… and it did… big time. Keating had spent
    all of the money on building things like the ultra luxury Phoenician
    Resort and solid gold toothbrushes or whatever. Then the reckoning
    came and the taxpayer got the bill dumped on them.

    Where my
    young family started going to church in the late 80’s is one of
    the largest in the nation with a gym that includes an indoor skating
    rink, indoor racquet ball, full training facility, snack bar, running
    track, games and goodies. Outside there are softball fields and
    tennis courts, etc., etc., etc. This was all built on debt to the
    tune of over 23 million. When the Resolution Trust Corporation (RTC)
    was looking to clear their books they would sell everything at fire
    sale prices and forgive gazillions in debt. When representatives
    from my church went to the RTC asking for their debt to be forgiven
    they were told that nothing could be done as long as they were current
    with their debt payments. Well that was easily taken care of and
    they stopped making payments until the RTC forgave over 10-12 million
    dollars (some separation of church and state).

    About
    a decade later these same people would lose many millions in the
    Baptist Foundation investments deal where many lost their life savings
    to more bad dealings of the same types of people if not the very
    same people. I remember what happened a few years ago when the investors
    were unable to make bills after they trusted these men of God to
    take care of the money that they got from their dead husband’s insurance
    policy, etc. The church set up a government socialist puke fest
    with representatives of as many government social programs that
    they could get to come to the church in the parking lot so that
    everyone could be helped in filling out the forms to get their government
    checks to see them through this terrible tragedy blah blah blah.
    Front page of the newspaper and everything,… they should be ashamed.

    So
    do I see the housing market going down? Hell yes. All the same neon
    signs are flashing.

    My
    libertarian activist simple mind is of the opinion that the other
    shoe has yet to drop on the stock market and that it is still overvalued.
    Speculation may have shifted to the real estate arena but that is
    being held up by consumption based on the lowest interest rates
    in my lifetime (born in 1961 — I'm a senior citizen of the X-Generation)
    and when the real estate market starts its fall the rest of the
    over valuation of the stock market will come with it.

    My
    coming of age at the end of the Viet Nam war put me in a time frame
    that had every kid my age growing up knowing that the US government
    was a liar and that the sacrifice of young men and women's lives
    for attention, wealth, status, legitimacy and/or votes was nothing
    more than a show of hands and a signature on a piece of paper for
    these men that were careful not to have their own suffer. I have
    always felt that I was born at just the right time. I can remember
    the most complicated thing on an automobile being the AM radio.
    I remember the space race and my father making sure I was awake
    to watch the moon landing. I remember the first Pong video game
    that evolved into illegal exports so the Soviets couldn't use the
    game's computer chips for their military. I grew up on Star Trek
    episodes that helped spark the imagination of my generation to the
    point that almost anything is considered possible. What we have
    learned is that the largest hurdle to dream fulfillments has been
    a psychotic Big Brother with the desire to live at our expense with
    nothing but brute force to justify his claim to our creativeness,
    productivity and even our lives.

    So
    do I trust the free-market to supply the opportunities for my present
    and future happiness for my family and me, or do I put my trust
    in the ever intrusive and manipulating governments of the planet?
    The ability of government to control the free-market over a person's
    lifetime has been shown to be impossible anyway. As travel, communication
    and innovations continue to increase the power of small groups,
    and even individuals, the governments of the planet are desperate
    to assert their authority into every aspect of our lives while doing
    their best to control the free-market.

    Libertarians
    have been the most inoculated people that I know against the deceptions
    attempted by those that use shiny badges and whistles (or just a
    gun in your face) to give their arguments validity.

    I
    have the choice of looking at the current directions of our economy
    from the perspective of a libertarian with even the most basic understanding
    of the free-market (that exist no matter what laws there are to
    make it "illegal") or I have the option of believing what
    I am being told by the talking heads parroting the varied versions
    of what is allowed to be spoon-fed to the American and the world's
    population. Libertarians knew the potential of the Internet and
    what was to come when we were all starting to communicate with each
    other in the first half of the 90's with 2400-baud modems. Truth
    always has a way of leaking out between the lines of propaganda
    and the simple truth is that the Federal Reserve has finally tapped
    into the last remaining reserve of wealth for a very large segment
    of the American people, their home. The availability of money through
    low interest loans have kept home values high but this massive increase
    in the money supply will have its reckoning.

    Phoenix
    is a hotbed of real estate investment. Developments are everywhere
    and of all types. $75 million dollar resorts are under construction,
    a new publicly funded football stadium as well as a publicly funded
    hockey arena. Housing projects are of all types and the desert is
    destined to be paved over from mountain range to mountain range.
    I am familiar with an old trailer park near downtown Phoenix where
    it was bought, leveled and a new condo development had the club
    house built and the utilities installed before they realized that
    the $130,000 asking price for the small condos was a dream. They
    were excited by the City of Phoenix's promise of special subsidies
    but construction stopped before the first foundation was poured
    on a prime 6-acre lot. The development was to be in the delivery
    area of my family's pizza restaurant so I had an interest in what
    were going up there and the increase in my customer base. I talked
    to the developers that happen to be on site when I visited the project
    early on and the speculative mindset was exactly what I remember
    in the late 80's.

    Contractors
    and developers are the first to get paid. If a housing development
    or a tax-funded sports stadium is built, the developers get theirs
    followed by the contractors. The banks have to rely on either the
    force of government to make the bonds good or the consumer had better
    be able to make the mortgage payment. What I feel is coming is the
    mad rush for builders to get theirs while the burden is left to
    the banks and ultimately the taxpayer that will be on the hook for
    the upcoming crash due to the FDIC. Plenty of dollars will be printed
    for the build up but will the people be able to repay in a society
    saturated with debt, a falling dollar, no savings and a home worth
    less than what is owed on it?

    Real
    estate in my opinion will offer bargains for those that have insulated
    themselves from the certain economic crash that is coming on the
    downhill track. But to invest in the housing market now would be
    a bad idea in the mind of this simple libertarian. Having a comfortable
    place to see this storm through is a very good thing. But if you
    are counting on the value of your real estate investments to be
    your "bank" as you were counting on your mutual funds
    and favorite stocks a couple of years ago, then you are in for a
    terrible disappointment. Real estate values are just as much a part
    of the free-market as anything else and the laws of supply and demand
    still apply. Supply will increase far past demand and prices will
    plummet.

    In
    this libertarian activist's opinion.

    December
    31, 2002

    Ernest
    Hancock [send him mail]
    has been a libertarian activist in Arizona for over a decade informing
    the masses via campaigns, court challenges and general rabble rousing
    as a method to use mass media for the greatest benefit.


         

    Email Print
    Share