“A SPATE OF POSITIVE DATA NEWS PUTS REAL ESTATE BLOGGERS ON SUICIDE WATCH”… That should be the headline you read today. The pending homes sales data came out today and it was positive. I can see the talking heads like Diana Olick now, “Ack! What should we do now; whatever will we talk about”? We all know bad news sells and newspapers and magazines really need headlines that sell, but I’m ready for some positive headlines. To quote George Harrison, “Little darling, it’s been a long cold lonely winter
Little darling, it feels like years since it’s been here,
Here comes the sun… and I say, it’s alright!”
As for Diana Olick, I actually really enjoy Diana, in fact, I wish I was Diana Olick; she’s smart, has a killer job, is well respected, gets into any restaurant she wants in NYC and DC, and she’s not bad looking either, but would it kill her to put a positive spin on something just once?
On Tuesday, Diana and CNBC reported that rents are rising and consuming more and more of our household incomes, but no one wants to buy because they don’t see the investment value. Huh? Let me think out loud for a second… “rents are rising, but I won’t buy because value could go down, so I’m better off paying the landlord’s mortgage, cuz gosh, I wouldn’t want the investment to go down. Maybe I should keep it in dollars hidden in my mattress? Yes, that and give it to my landlord…” Come on people, that just makes zero sense. But does Diana articulate that? No, rather she then raises the specter of the US Government going into the landlord business as a way to absorb the Fannie/Freddie REO and “Shadow Inventory”. Blah, Blah, Blah. Raise your hand if you’re tired of hearing about “Shadow Inventory”.
OK, let’s talk about the nation’s housing inventory for a second. Guess what areas are hardest hit and have the largest glut of unoccupied and distressed properties in America? Las Vegas? You’re right. Phoenix? Right again. South Florida? Wow you are amazing. Palmdale, Modesto, Sacramento Ca, Detroit, MI… Seeing a trend here? What we have is an oversupply in areas that are either in the midst of a long economic decline, or in areas where builders built on endless land, which in turn created a gajillion construction related jobs. And don’t give me a construction job building a house of cards is still a construction job, ’cause I don’t buy it.
When I was growing up in Northern California, people moved to Las Vegas for one of two reasons: they we’re either working for the casinos and tourist industry or they were retiring and wanted cheap housing and senior discounts on endless buffets. What Vegas became was a Ponzi Scheme. Housing created jobs, which created demand for housing, which created jobs, which created demand for housing etc. One paid for the other until it couldn’t anymore and then the whole thing fell down, worthless, broke and broken. Vegas, Phoenix, Miami Beach was a Madoff-esque creation.
So why not have the Feds be landlords and just rent these places out? The problem with this conceptually is that a lot of the inventory is in areas where there isn’t any need. Remember sand doesn’t have the same value in the desert as it does in a glass factory. However, if the homes were cheap enough for rent, then people might opt for them over apartments and help minimize the need for apartment housing (of which little has been built in the past few decades, at least in California). Or we could just let the free market dictate the absorption until the entire inventory is gone. There is precedent where the government owns and rents housing on the cheap to qualified low income residents, and this wouldn’t be a bad thing; heaven knows the homeless situation in America is appalling (is homelessness in America and a glut of housing inventory an oxymoron?). However, rather than put the government in charge, why not incentivize investors and let them do it? This is a concept even Larry Kudlow would embrace. In California we call it Section 8 housing, and there are tax incentives for property owners to comply with the government mandated requirements, and everyone wins. Government and the private sector working together, what a concept! Anyway, my point is, the news is getting better; the patient is on the mend and like a kid asking a stranger to toss an errantly thrown baseball back into play, I say to CNBC and the like, “A little help here”?
Published on 2011-04-28 09:11:40