Hindsight is always 20/20 and we can all now make our comments and think we are the smartest. Here are my 2 cents too, on why it is so. The main discussion then is - are we really fixing this (& we look forward to your comments on that)? Most of our discussion in this article and part 2 of this article, to be posted later, will be about that!
Why are we here?
Many reasons, greed being # 1; carelessness being # 2 (by banks and lenders); short term investors being # 3; the list goes on. This was all working well (on the surface) but when the banking crashed, it started showing it's toll.
The market was never a problem for qualified buyers who were buying their homes for long term living, and put enough money down. It did become a problem, however, for those who borrowed 100% or more of purchase price; for those who had bad credit and didn't know how to manage it any better; for those who left nothing for unforeseen circumstances; and then unfortunately for those - who did everything right but lost their job and couldn't afford to stay in their home. While the banking mess was huge, major factor the greed & carelessness.
And now, the banks have taken a 180 degree turn and won't lend to even the qualified buyers, so that adds to the problem. Add to it the bad economic news (though showing some signs of recovery) and job losses, plus some short term fixes w/o long term consequences by our leaders and the things just get worse.
Another major factor resulting in short sales and foreclosures is those bank executives making wrong decisions/policies even today. Instead of working with those who are paying in time but struggling and requesting a payment plan or reduction in interest, they tell them that they will talk to them when they are late on their payments. What an incentive to a homeowner who wants to do it right!!!
This can go an on and on. Let's go to the real question - Are we on the right track?
My answer, for very long time, has been NO. The only way to do it right, for long term benefit, is to reward the right behaviour, not wrong. To reward those who keep on doing it right instead of those who don't care. To help those who really did everything right but are now victims of the market conditions or their personal circumstances (not because of their doing). Reward the good ones, and encourage those at the bottom to get the reward too, goes a long way instead of encouraging people to do it wrong and benefit so that others can follow the same.
Those who need genuine help, MUST be helped. We must evaluate their past profits and their current circumstances. I know this is not an easy task but we are not talking about easy. Long term is never easy, but always the best.
Another thing is this $8,000 credit to the first time buyers. Is this a good thing, you bet!! But not if it doesn't come with conditions like evaluation of bad past behaviour such as too much debt, bad credit, bad spending habits, taking out equity to buy luxury items and vacations, etc that has no explanations. Selling homes just for the sake of it will only bring those homes back on the short list and foreclosure list not too long from now. And if we stay in this mode, when will we get out of it? How long will those with proper habits and commitment to take care of their obligations keep paying for those who just keep spending and then don't know how to pay back?Our politicians can't just look good by taking short term decisions, they have to look beyond. Their problem ofcourse is long term thinkers won't get re-elected because they didn't make a popular decision or because their decision didn't show the quick results we all want. And most politicians worry about the polls first, right way after.
So the buck stops at us - we must reward right behaviour - of our politicians and of ourselves. If someone puts themselves in the situation they are in due to their carelessness or no care attitude, they MUST NOT be rewarded. But those who become victims of their circumstances, despite their best efforts, should be helped no matter what it takes. We must not do things just for the sake of doing them.
More to continue. Send us your thoughts.
Sanjeev Aneja, Broker/Owner
sanjeev@ontrackrealty.com
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