Orlando Real Estate

The Age of Enlightenment..uh Entitlement

March 7th, 2009 7:59 AM by David W. Welch

There was an article on the front page of the Orlando Sentinel yesterday that states that there are currently 45,000 homes in some stage of foreclosure. These are default notices not just foreclosure proceedings. I checked the Bureau of Labor Statistics and currently there are almost 87,000 unemployed which is up from our low of around 30,000 back at the end of 2005 beginning of 2006. That was pretty much an unsustainably low number given our population growth at the time. A number in the 40,000 range would be more typical for the size of our work force. That means about 45,000 additional people are out of work and probably having difficulty making their mortgage payment.

In the past, people would have done whatever they needed to do to make those payments, but I am afraid that the latest $75 billion plan along with other aspects of the bailout may create a disinsentive for people to make their payments. I am just concerned that there is a growing feeling of entitlement to a bailout. I feel very badly for everyone that is affected by the current economic situation. Unfortunately, I believe much of what has already been done is actually pushing home prices down more. My plan that I have been blogging about is simple and in the end would cost far less. Just buy up all the foreclosures. If something is done about the over supply of homes on the market, you will see a rapid turn around. Buy them and hold them until the market can re-absorb them. Banks are overwhelmed trying to manage them, the courts are overwhelmed trying to process them, they are slowing down the rest of the organized real estate market. Oh yes, they are driving the values, real and perceived, down as well.

The best part is that this is not a bailout, it is not some kind of corporate welfare, and the government is purchasing assets at below market values. That is called an investment. If the Fed can manage money supply, why can't the housing supply be managed as well. The foreclosures are the difference in our markets, and they are easy to identify and control. Nobody likes the $75 billion plan, just take a look at the markets this last couple of weeks. Polls already show that the vast majority feel like this plan is not fair to the 90% that are struggling to make their payments. We need to help the people having difficulty, but this is not the way. Take the money and buy up all the foreclosures. It stabilizes the housing market, injects billions into the banks while clearing their REO inventories, and clears the way for recovery of the housing market. Stop the entitlement mentality, and start addressing the problem at the core.

David Welch, Real Estate Optimist

Posted in:General
Posted by David W. Welch on March 7th, 2009 7:59 AM


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