Lately it seems like we are living through history every day. Not since the Great Depression has the United States seen such turmoil in financial markets. What started in the subprime mortgage industry has now entered Wall Street.
When post-Civil War investment houses close their doors, it’s a sure sign that something has gone terribly wrong. First Bear Stearns, then Lehman Brothers, and then Merrill Lynch and Washington Mutual.
We all can’t help but feel a little angry about what’s going on. But while I and others are pointing out that the markets are only going through a “correction,” I’m asking, “Denise, how much of a correction do we have to do?” You might ask.
Obviously, a big one. The answer is that a lot of money loaned to many people who can’t afford to pay it back is a sure recipe for disaster. It’s time to pay the price.
Some analysts are comparing the current situation to the stock market crash of 1929. However, there is one big difference between then and now – we are not even close to being in the same economic hole.
Case in point: As of this writing, the $700 billion bailout (or is it buyout?) being debated by lawmakers is a huge amount, unmatched since 1929.
Today, we are prepared to meet such challenges – in part because we have learned from history. When the Great Depression began, there was no backup. The US government was in a much more “hands off” position than it is today.
While some like to argue that it’s a good thing for the government to stay away from the free market, the new and upcoming legislation promises to bring at least some security to the American economy. The time for arguments from political principle is over. Something must be done – and thankfully, our leaders are actually stepping up to do something. The question is whether these leaders will help or add to the problem, only time. As of this writing, they have not been able to come together.
After four (or more) years of out-of-control lending, special lending, predatory practices, and the ensuing subprime mortgage meltdown, the government is finally taking steps to step in before it all goes to waste.
Of course, many are questioning why Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke didn’t do something before this mess happened. While it’s true that no one can predict how bad the damage will be, when banks start handing out loans like candy, something is obviously wrong.
Two to three years ago, every time I heard a mortgage ad on the radio talking about a rate that could fix small numbers, I winced. I wondered how long this could last. During the election, it seemed like we would never finish. We are now suffering from a major reality check.
So what does this mean for the average real estate agent? First of all, the media is wrong. It is not a bond. It’s buying.
A bailout is when a company gives money while forgiving its debt. Shopping is when you come in to save the day – but there is a property to be traded.
The latter is what the U.S. government has planned: providing money to foreclose on real estate assets. Real estate assets are assets. So, by definition, this is a purchase.
Based on my own personal experience with markets, I think the government could do well with this deal. think about. They come in and take out bad loans and refinance them on a smaller scale. It’s a win-win situation.
Finally, there is always money to be made in payday loans. Although the government has restructured these mortgages, we all know that real estate is still the best long-term investment.
I believe it will be the starting point for the “Greatest Real Estate Appreciation of 2012”. Real estate will rebound. It is always renewed. It will always be. And all the major factors are adding to it – overpopulation, migration, emigration, a society with higher purchasing power, higher divorce rates and people living longer than ever before.
Personally, I would like to see all the corporate executives who led the failed companies down this disastrous financial path stripped of their bonuses. How can a CEO get a $22 million bonus when he bankrupts his company and leaves shareholders in the bag? For me, this is one of the most important waste articles.
So only time will tell how long it will take our leaders to fix this. Surely something must be done!!!
And remember that when consumers worry about Wall Street, they want to invest their money in real estate. So don’t jump to conclusions and believe that the real estate market is going down with Wall Street, it’s the real estate market that will get our economy back on track.