UnREality of Real Estate

For a while now we have been treated to entertaining sound bites from mortgage & financial institutions, national association of realtors (NAR), the federal reserve, the treasury, wall street & last but not the least politicians on the upcoming bottom in the real estate market . Looking at their sometimes overenthusiastic & partly desperate pronouncements one would think that the day the ‘bottom’ is reached, a national holiday would be declared. But unfortunately for them the facts indicate otherwise.
Last weekend the headlines were dominated by the takeover of Fannie Mae & Freddie Mac by the government, also existing home sales fell by 3 percent or so belying the warm & fuzzy feeling the previous month’s report showed. More banks are set to be falling like a row of dominoes. Home builder’s sentiment (I don’t know how that one is calculated) is said to be at an all time low. Given all these key indicators pointing downwards I wouldn’t conjecture on the utopia called the bottom.
Save for pockets across continental US like the Silicon Valley Bay Area (because of vibrant economy), Charlotte & Houston (because they never experienced a boom) or Manhattan (because well it is Manhattan), the outlook is especially bleak for those who bought homes after the peak in 2006. The fact that the pendulum is swinging the other way is not surprising, what is surprising is that many people expected the gravy train of real estate appreciation to keep chugging along. Now the government in cahoots with special interest groups of real estate wants to keep this party going. Their rationale is that our economy will go to dogs if they don’t do what they are currently doing namely giving multi million dollars handouts to people to people who least deserve it , this flies in the face of everything that our economy is based on , free market society, capitalism , profit/loss cycles & most importantly ethics .
If the government was looking to alleviate the housing miseries by digging deep into its own pockets , there could have been some commiseration to its actions , but the tragically funny part is that ultimately we the taxpayers are going to be handed the bill for this profligacy which is what makes actions like bailouts of investment houses like Bear Sterns , publicly traded institutions like Fannie Mae & Freddie Mac particularly galling & now as per the grapevine a huge safety net is being put in place for the troubled investment firm Lehman Brothers for overleveraging themselves on mortgage bets.
Indeed people are going to the extent of accusing US being more socialist than China; at least in china while they share the pain, they share the gains too. But here in the US we seem to have been following a dictum of corporatized profits but socialized losses.
In which other country would we see executives like Messrs. Daniel Mud & Richard Styron of the soon to be moribund institutions of Fannie Mae & Freddie Mac be provided with platinum parachutes to ensure a smooth landing for running their respective institutions to the ground . The execs are initially put in their positions not only because they have glittering academic records from ivy leagues & but also because they are expected to provide vision to their stated goal of public service in which they failed miserably, you cannot argue that they did not see the mortgage imbroglio coming , the only excuse for that would be they were blinded by greed. The list of corporate types getting obscene bonuses for achieving nothing in the end is long starting from Chuck Prince the ex chief of Citibank to Angelo Mozilla of Countrywide financials .
Since when in America are we rewarding incompetence, major league deception & hubris? Especially at times when the average American is drowning in debts be they credit card related or mortgage induced? It is touted as a land where is hard work is justly rewarded, guess what? Shady work pays much more, so why don’t all of us abandon our contractual obligations visa vies mortgages, indulge recklessly on credit cards without paying them after all, the execs seem to get away from their own indulgences, agreed that the mantra of any capitalist system is to make profit, but they should have gumption to take any losses that come their way & not the run to the taxpaying public to bail them out after all it was the same public they fleeced on their way up top.
Unfortunately they exists a degree of comfortable cronyism between the leaders of the financial markets & our political leaders who in turn are beholden to their campaign contributors and so on , a storm in the form of the mortgage debacle is now on the horizon which threatens this convivial arrangement & they are all looking at ordinary citizens to help them out of the mess they created , only time will tell if the public will be willing pawns in this great mishmash or if they will create a storm of their own to rectify the wrongs of the past .