First Time Buyers…That’s a Joke!

by L. J. Martin

http://fromthepeapatch.com

I guess I shouldn’t be surprised when I read headlines like "fewer first time buyers hurt market," in an article regarding home sales, or that, surprise, 33% of home buyers are cash buyers. You can’t buy a foreclosure without cash, or a bank letter of credit which is the same as cash. Reporters (and politicians) would make you think that many buyers out there actually had cash to pay for their new home, when the buyer was actually an investor or group of investors picking the house up for well less than it had originally sold for, or even cost to build...in many instances, way, way less.

And they do so at great risk. For most originally sold for far more than the cost of the lot, the cost of construction, the cost of financing, and a fair profit to the builder. They sold for artificially driven up prices in a phony market created and driven by no-qualify loans, and promises that "real estate never goes down." As 35 years a California real estate broker who worked all over the west, I can tell you about 5 or 6 times that the market went in the tank. Never as badly as this last 5 years, but then those who couldn’t afford homes were never before encouraged to lie on loan applications.

Houses in this country sold for five years for terribly inflated prices, prices artificially driven up by buyers trying to make money, not have a wonderful place to raise their family. Our cleaning lady bought five houses. There is absolutely no reason a cleaning lady shouldn’t invest, however there is a reason no one should invest by falsifying their loan application, a process encouraged by the Barney Franks and Harry Reids of congress, with a don’t ask don’t tell approach not only to military enlistment, but as to credit qualification for home loans. But thanks, Barney and Harry, you eased the process of buying with "stated income" (lying about what you make), and eased the country right into the worst recession (read depression) since the great depression of the late 1930’s.

And those same reporters seem surprised that first time home buyers now have higher credit ratings than five years ago. Duh! Since there are finally sensible requirements for loans, it only holds that the credit ratings would be higher. It’s not some strengthening of the economy, allowing first time home buyers to have higher ratings, it’s the fact only well qualified buyers can buy a home. Finally, mortgage companies and banks have come to their senses.

The liberal press and the government continue to try to make us believe that the current mess in the country is due to Wall Street and evil mortgage brokers, which is a laugh. No, Wall Street nor the lending institutions are saints, but they are business people and they do what they can, 99.9% of the time legally, to make money, and making money is what drives this free enterprise economy of ours. When government is lax, or trying to buy votes by inserting artificial economic conditions into the economy (read phony credit requirements for loans) then Wall Street and lending institutions are going to take advantage of it.

If any private institutions are at fault for our present piss poor economy it’s the credit rating companies. Those are the companies who gave AAA ratings to the packages of loans that were sold to investors both here and overseas, when in fact those loans were made up of far too many who qualified with "stated income," i.e. lies.

Some of those folks should go to jail. The days of caveat emptor are long past, and even when you as an investment analyst have done your job of due diligence, you would expect to depend upon companies such as Dun and Bradstreet and Moody’s.

However, in the final analysis, it was congress at fault. They set the standards, and the buck stops there and in their committees. And they are the reason this country is in terrible trouble.

As far as I’m concerned Barney Frank and Harry Reid and their fellow travellers should be drawn and quartered…but that’s just me believing in true justice. They caused more heartache and suicide and sickness than the last three wars, yet they’ll retire fat and sassy on your money and mine, and that of millions of hard working folks who didn’t lie about who they were and what they could pay for a home.