With Real Estate, All of Washington is Elitist

November 24th, 2008 Categories: Economics, Real Estate

Even my choice for President Barrack Obama doesn’t understand real estate like the common man. Washington has done so much to talk about derivatives and the liquidity of banks, and have geared its solutions to Wall Street, probably the Big 3 automakers, but main street has been ignored. I am not saying that we shouldn’t bail out the financial system, although the purpose of the banks lending money has not happened, so not blank check should be given Detroit or anyone else in the future. But at the heart of the problem is toxic mortgages that have increasingly been foreclosed on and housing prices have continued to slide down a slippery slope bringing more misery to responsible mortgage holders who are now seeing there values becoming less than what they owe, so they soon send the keys back and add to our woes. here are a few suggestions from someone who will never be elected to high office, but sees the problem on the ground, up close and personal.

How to take care of past history

So far, mortgage workouts for troubled loans have not worked out. Over 50% of the workouts will still go into foreclosure. What has to be done is Fannie, Freddie, and FHA need to absorb losses so that principle amounts can go down, and we can reduce rates below 5% or whatever is required to give a fixed rate that works within the maximum debt percentage of a normal fixed rate A rated mortgage. The fact that foreclosures are accelerating, and six months extensions for bad loans that delay the problem will not stop the home values from its . As values go down more people become negative on equity, then even more foreclosures happen.

Take care of real estate Investors

No talk of mortgage workouts by the federal government has ever addressed the multitude of investors that speculated especially in formerly hot markets like Florida, Arizona, and Nevada. There is no way to draw a line between who deserves a break on a mortgage versus those who were foolish. 40% of foreclosures in these areas are investors. If a house goes into foreclosure does it really matter if it is a homeowner or an investor. Maybe you can have them share their equity on point of sale, but any foreclosure affects values in that neighborhood or city. If an investor can get that low fixed rate mortgage and it results in neutral or positive cash flow then the investor will hold on to their properties. The renter also gets a break because they do not have money out of pocket to move to a new rental property. To not address the investor in any real estate bailout will defeat the purpose of rescuing the owner-occupant, the stabilization of home values, and the preservation of a local tax base.

The Future has to be addressed too

While we are keeping people in their homes will real modification, they housing industry has another problem. People are scared to buy a home. Psychology and fear are keeping people on the sidelines. We need to have special low interest loans for people to buy. By making it compelling, again by doing something like a 5% 30 year fixed rate with no points is a way to get people off their couches and buying homes and condos. This also benefits retail because people go to carpet stores, Lowe’s or Home Depot, appliance stores and more to put extra money in the home to make it their own. Improvements also make taxes go up so that local governments don’t have to cut services and jobs. Finally, let the investor loose. In Oklahoma back in the 1980″s when our economy was bad, the investors took the excess inventory out of the system, which eventually led to a sellers market. Fannie Mae has cut the number of properties for 10% down loans to 4 from 10, so that it is harder for investors to buy more property. Also mortgage insurers are not backing 10% down investor loans so that 20% down or more is all you can get. As an investment specialist and investor, return on investment can be enhanced by lower down payments. Also, I am selling out of my portion of a commercial building. If 10% down is available, i will buy two properties instead of one. The result? Less inventory on the market because that can cause price drops just like foreclosures.

Conclusion

We have got to rescue Main Street. While it is important to save the financial system, the toxic assets they were supposed to be relieved of where the derivatives that were packaged using sub-prime loans. This rescue of the housing industry contributes to the stability of the financial system and our country, and the rest of the world. This means everyone who is in trouble whether they were foolish or not, or whether they were owner-occupants or investors. Housing is a huge part of our economy, and it seems that Washington does not understand what you and I see everyday. It is great that they can have genius theorist who can tell you why something has happened, but don’t have the common sense to help us get out of the problem. It is time that government officials get their heads out of the clouds, and see what is happening on the ground in our neighborhoods.

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Oklahoma comes from the Choctaw Indian phrase okla humma, or Red People. Choctaw Chief Allen Wright suggested the name in 1866, when Oklahoma was Indian Territory, and the tribes envisioned an all Indian State of the United States. That changed in 1889, when the famous Run of Oklahoma transformed the land into Oklahoma Territory, where citizens come come for a free 160 acres of land. In 1907, Oklahoma was declared the 46th State in the Union with it's Capitol in Oklahoma City. Our state still reflects the hard work and daring that those first settlers brought, and today we are a proud state that leads the nation in the appreciation and stability of our housing market. Let me introduce you to some facts about our state.

Geography
Oklahoma is the 20th largest state in the Union covering 69,898 square miles. It is adjoined by the states of Texas, Kansas. Arkansas, Missouri, and New Mexico. Sometimes Oklahoma is associated with the Sun Belt, the Southwest, the Midwest, but officially is considered a part of The great Plains. It is among the most diverse states in geography, and is one of four states with 10 distinct geographical regions. Oklahoma has four mountain ranges, 200 lakes created by dams, and it holds the highest number of artificial reservoirs in the nation. Forest covers 24% of the land, and much of the land is given to agriculture, primarily wheat, corn, and barley as primary crops.

Economy
Oklahoma is an important producer of natural gas, and ranks fifth in the nation in production of wheat. Six Fortune 500 companies headquarter in Oklahoma. In 2008 Oklahoma has led the nation in increase to the gross national product, and is ranked No 1 in housing appreciation as a State according to the Office of Federal Housing Enterprise Oversight. At present Oklahoma possesses one of the lowest tax burdens in the United States, and current employment is at 4.2% statewide. Oklahoma has seen dramatic growth in it's traditional industries of energy and agriculture, but the major cities have seen above the national average growth in construction, hospitality, bio-science, technology, military, and government. Oklahoma is currently running a significant surplus in government, and infrastructure spending has been among the highest in the nation.

Arts and Theater
Oklahoma is home to a diverse music culture where festivals to honor jazz, Native America, Mexican, African-American, and Asian cultures represented by the state population. The Oklahoma Mozart Festival in Bartlesville is one of the largest of its kind, and Oklahoma City's Festival of the Arts has been named one of the top festivals in the U.S. Both Oklahoma City and Tulsa have top flight classical orchestras and Ballet companies, and Oklahoma has a significant museum presence with Oklahoma City's National Cowboy and Western Heritage Museum, and Tulsa's Gilcrease Museum together have the most significant collection of Western art in the country. The Oklahoma City Museum of Art possesses the largest permanent collection of Dal Chihuly glass in the country, and the Sam Noble Museum in Norman is one of the largest University based natural history museums in the U.S.

Demographics
As of 2007 according to the Census Bureau, Oklahoma has a population of 3,617,316. The state has the second highest Native American population in the country. Both Oklahoma City and Tulsa have for the last few years been at the top of metropolitan cities for income growth. Much of the population of Oklahoma is centered around these two cities with Oklahoma City and surrounding suburbs at around 1.25 million, and Tulsa at one million.

Future Expansion
This fall Oklahoma City will host the state's first major league franchise with the relocation to Oklahoma City of the Seattle Sonics and Storm. Dell has a planned expansion in Oklahoma City from its current two buildings with 2350 employees to seven buildings on its 62 acre campus to an expected 7000 employees. Tinker Air Force Base is currently at 29,000 on base and is expected to go to 45,000 within ten years. Devon Energy, one of the leading natural gas companies in the world is beginning a 54 story Tower in Oklahoma City valued at 750 million. Chesapeake Energy is not far behind and has also become one of the largest real estate purchasers and developers in Oklahoma. The state is home to the largest FAA center, Tulsa has just finished it's new 350 million arena, and the state possesses one of the fastest growing biotechnology industries in the nation. Oklahoma has a large presence of Indian Casinos, but has a state compact with the tribes that has brought in 2 billion dollars in revenue in the last two years. As the lyric says from the Rodgers and Hammerstein musical Oklahoma, "Your doing fine Oklahoma".

Joe Pryor

Real Estate Consultant

With Real Estate, All of Washington is Elitist

How to take care of past history

Take care of real estate Investors

The Future has to be addressed too

Conclusion

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