Welcome to a replay of the worst movie you ever saw. The National Association of Realtors just went full throttle on their incredibly self-centered and irresponsible campaign to block new legislation which will add tremendous long-term stability to the US real estate market (NYSE:IYR).
Unless you think the purpose of a house is to enrich brokers in a real-world game of Flip That House, you will find the following propaganda from the NAR to be disgusting ? especially after their last scheme contributed heavily to the dire economic situation we?re all living through. Let me start with a quote from?NAR chief economist?Lawrence Yun:
?Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards.?
Held back? From what? Internal sales targets at your local real estate brokerage office? As Yun et al may frequently forget, we are still unwinding from the largest housing bubble in US history. Sorry, Yun ? this isn?t going to be pleasant. So, you cannot run around Washington lobbying for more debt to be irresponsibly lent to a population of people who already proved they cannot properly assume large debt burdens.
Seriously, if someone cannot afford a reasonable portion of an item?s price (e.g., 20%), then the market is clearly mispriced AND too heavily dependent on subsidies (i.e., debt) to make the market. Unfortunately, the NAR doesn?t want to face this reality because, like overpriced college educations, a reduction in the ability to use other people?s money necessitates a decrease in product prices. (Check Out ?Meet the Graduating Class with the Highest Debt Burden EVER?)
Ironically, NAR?President?Ron Phipps admits ?Very high shares of cash purchases, and high credit score requirements, have led to historically low default rates among home buyers over the past two years.? This must have slipped through the cracks of the NAR propaganda room because this is the exact goal the US is aiming for amidst the greatest tsunami of defaults and foreclosures imaginable. Obviously, the NAR?s goals are not aligned with the long term economic health of the US. Can someone say principal-agent problem?
But that?s not how the NAR executives see it. In their weekly member email, Phipps tries to invigorate the troops with this desperate call to action:
?As you may know, there is a proposal before regulators to require a minimum of 20 percent down on all residential transactions. If allowed to take effect, the rule would put home ownership out of reach for middle-income Americans. It would take the average family 14 years to save up the down payment to buy a home. We just don?t need more hurdles. So please take time to visit the REALTOR? Action Center to answer the Call for Action and tell Congress this does not work for our industry or our country.?
Although Phipps is wrong about what?s best for our country, he sure doesn?t hide the fact his agents simply ?don?t need more hurdles? for people who can?t afford to buy what real estate agents are pushing. The NAR can use deceptive comments about homeownership affordability, but it?s much more complicated than that. If we want to see what genuine affordability looks like, we need to let the market prices reset to supply and demand without the debt subsidies which have driven prices higher. But again, the Wizard of NAR?s Oz doesn?t want us to look behind that curtain.
To conclude, let?s recap on an elementary syllogism. Real estate brokers are salespeople. They make money only when they sell stuff. The more they sell, the more money they make. The more money real estate brokers make, the more members the NAR can charge fees. Therefore, it?s in the NAR?s best interest to facilitate legislation ? no matter how harmful to the US as a whole ? that increases the quantity of real estate (NYSE:IYR) sales. It?s that simple.
Now, it?s our job to make sure our representatives in their respective legislative brothels don?t screw the principal (us) in favor of the greedy agents (the NAR). Just because the drug dealer is down on his luck doesn?t mean we need to create more junkies.
Don?t Miss:?Here?s How Student Loans are Ruining the American Dream.
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