This Week’s Rant 10/25/10

I want to share a blog post from The NOTORIOUS R.O.B. (Dated 09.21.10). If you haven’t checked out his site you should. There is wonderful information and thought provoking writing there. I believe this is dead on…READ and you decide…

Like It or Not, You’re All Political Analysts Now

 

My friend Matt Dollinger recently commented on a post by the longtime real estate expert Steve Harney. Both were commenting on the doom & gloom article from Time Magazine on how homeownership is overrated. Steve Harney rightfully takes Time to task:

Again, they are simply arguing a miniscule point of an extensive research paper that proves the benefits of homeownership. Where is their research, their study, their expert testimony disproving this study’s results? They gave none because there is none. (Emphasis in original.)

Matt, in commenting on what Steve Harney wrote, and on the gloomy headlines from newspapers and magazines, suggests that real estate agents need to start focusing on how to answer questions from confused consumers:

We all understand that this is a difficult time for those in real estate… both consumers and agents alike.  However, your job above all else, is to become the Trusted Advisor of those closest to you and choosing you to represent them.  That means that you are responsible for being able to decipher fact from fiction and opinion from proof.  There are many conflicting headlines out there today published by everyone from trusted sources like Wall Street Journal, CNN and many others.  Your job is to sift through this material and create KNOWLEDGE from the DATA presented.  Only by creating this knowledge and providing it objectively to your clients can you truly assist in their decision to buy, sell or invest in real estate.

I agree wholeheartedly with both Steve and Matt insofar as their trashing of Time’s “reporting” and their recommendations to real estate professionals.  I do, however, think that the implications they draw are not necessarily what we’re going to face.

I believe that every real estate professional today, like it or not, has to become an amateur political analyst because it is well-nigh impossible even to understand what to make of conflicting headlines without understanding the political implications.

What If Time Isn’t Reporting?

Steve rather thrashes Time for its insipid “report” on the dark side of homeownership.  And his point about Time’s incredible claims based on nonexistent mixed results is 100% on the mark.  But where Steve assumes that Time is performing a journalistic function, thereby failing it horribly, I assume instead that Time is performing a public relations function, and succeeding in pushing the agenda of its friends in government.

The title should give away the game: “The Case Against Homeownership”.  The writer, Barbara Kiviat, is a vegetarian “happily living in Manhattan” which tells me something about her socio-economic and socio-cultural status, as well as what personal views she might hold on the American Dream.  Because I too lived happily in Manhattan in my late 20′s and remember my views on homeownership.  Ms. Kiviat is likely a lovely woman, brilliant and funny, and probably lots of fun to hang out with — but I seriously doubt that she counts many middle-class Americans amongst her circle of friends.

I think we should take Time at its word.  It isn’t reporting anything; it is making the case against homeownership. It is asking the readers (the ones who aren’t leaving in droves) to think that owning a home in America is a bad idea indeed.  The article is an extended op/ed.

The question one should ask then is, Why?  Why is Time Magazine interested in pushing the narrative that homeownership is a bad idea?  Is it out of the goodness of their hearts?  Their deep concern about Americans making foolish financial decisions that will ruin them for life?  If so, the time to run that story would have been in 2005 (pun fully intended).  Instead, as Steve Harney points out, in 2005, Time was singing a rather different tune.

The answer, I think, is that the Obama Administration is committed to changing the American housing policy.  I’ve written on this before here, here, here, here, and here, as well as on AOL Housingwatch, so will save many innocent pixels.  If you’re interested, go read those posts.  Apparently, Time magazine, as part of the government-media complex, has decided to support the Administration in its objective to change housing forever.

Whenever you see gloomy headlines about housing, whenever you see Op/Ed pieces about how homeownership is overrated, about the risks to owning a home, etc., I believe you should naturally assume that the newspapers/magazines/bloggers are doing so for a reason — unless shown otherwise.

Political Awareness Required

Thing is, just because the government-media complex is pushing a particular storyline about housing and have no idea what they’re talking about does not mean that you can simply ignore them either.  Consider, for example, this post from Steve Harney’s blog entitled, “Five Reasons to Buy A House Today”.  In it, the “KCM Crew” makes five major points:

1.    Buying may be cheaper than renting

2.    There are tax advantages to owning

3.    Homeownership builds wealth

4.    Real Estate is a good long term investment

5.    Experts Expect Price Appreciation Starting in 2011

All interesting points that we can debate in some other post.  But what they all ignore is the possible impact from policy decisions.

Tax advantages to homeownership?  Sure.  Today.  But note that Barbara Kiviat in her Time hit-piece specifically mentions this tax advantage:

As a consequence, Washington lavishes homeowners with special treatment. When they file their income taxes, they can deduct mortgage interest and property taxes. When they sell, they don’t have to pay tax on the first few hundreds of thousands of dollars in profit. In 1986 the tax code was rewritten, disallowing the deduction of interest from consumer loans like credit card debt, but an exception was made for the interest paid on a mortgage — a caveat that cost the government some $80 billion in lost revenue in 2009.

With the discussions going on in policy circles in Washington DC these days, any professional Realtor who tells a client to buy a house because of tax savings, without also mentioning that said tax break may be in jeopardy, is engaging in malpractice.

And of course, if the mortgage interest deduction goes, that changes the rent vs. buy calculation as well.  It will also have an impact on long term housing price appreciation.  And I’d like to meet the expert who believes in home price appreciation in 2011 if the mortgage interest deduction goes away.  That’s just one small piece of the housing policy puzzle; we haven’t even touched Fannie Mae, Freddie Mac, and what the government is thinking about doing on that front.

Fact is, there is not a single aspect of real estate that is not impacted — and heavily so — by government policy.  This industry is a regulated one that exists in its current form only because of government policy.

Change and Adapt

 

This is not to suggest that no one is going to buy homes in the future.  Nor is it to suggest that realtors should just climb under their bedcovers and wait for death to arrive.  The market will change and adapt, as markets always do, to government policy.  The SMART brokers and agents will figure out a way, and the rest will find other employment in other fields.

It is, however, to suggest that the professional who wishes to follow Matt’s advice to remain a trusted advisor, who wants to sift through the headlines and create knowledge out of data, must today become an amateur political analyst.  She has to know how to read between the lines in propaganda pieces, delve into the minutiae of committee hearings, think tank working papers, and little-advertised conferences.  (Or find someone who will do all that and give her the low-down, like NAR’s political wing.)

Isn’t it great?  As if you didn’t have enough things to learn and study to be an effective real estate professional….

-rsh

Thanks again Notorious R.O.B

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About Lance Berwald, Coldwell Banker Burnet

I am a real estate aspirant and scholar. Always seeking to learn more about an every changing world and industry. Come and seek the truth about life, real estate and what motivates us each and every day!
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