Destroying the American Housing Industry

The new housing industry impacts approximately 25% of the American economy.  It is impossible to have a strong economy in the USA without the participation of the new housing industry.

New housing is not just single family homes.  It also includes multifamily housing.  In fact, when the housing starts number is reported each month, that number reflects the total starts for both single family and multifamily.

The USA is blessed to have a growing population.  That has been one of our characteristics for hundreds of years.  While the sources of primary growth have periodically shifted between births and immigration, the constant increase in population has provided economic growth.  A review of countries that are not enjoying economic growth demonstrates that it is impossible to have declining population and economic growth.

Recognizing that “owners” have a different perspective than “tenants”, our government has wisely created incentives for Americans to buy their homes.  To facilitate that result, over the years since the Great Depression, a variety of government agencies and entities evolved to facilitate home ownership.

One of the Government Sponsored Entities (GSE) that was created is The Federal National Mortgage Association (FNMA) often referred to as Fannie Mae.  Fannie Mae and her sister GSE’s existed to buy home loans from banks and brokers with the intent of selling them as an income producing asset to investors such as insurance companies.

These loan packages were attractive because they were conservatively underwritten and carried an implied Federal Government guarantee which made them AAA.  Recognizing that the American taxpayer had some potential obligation, Fannie Mae was always VERY conservative in its criteria for the loans.

In 1999, to achieve his political goal of increasing home ownership, Clinton appointed his friend, Franklin Raines, to be CEO of Fannie Mae.  Within a few months of his appointment, Mr. Raines changed the loan criteria so that Fannie Mae would begin buying the loans of unqualified borrowers – what we now call subprime loans.

But 0nce they were bought by Fannie Mae, packaged together, and sold to investors those subprime loans carried a AAA rating because they were backed by us taxpayers!  This is like the fairy tale of spinning gold out of straw… and just as real.

Franklin Raines received bonuses equal to tens of millions of dollars before he left Fannie Mae and we American taxpayers got nailed with the problem of making good on the guarantees.  Today, the entire housing industry is trying to recover but is operating on fumes.  The ripple effects continue to impact 25% of the entire economy, including the land market.

To take advantage of the result of the market dysfunction, you should buy one really high quality tract of land at today’s very attractive price.  Select well and that tract will provide many benefits to you over the next several years.

Our goal is to help you thrive, not just survive your way through this economically historic time period.  Call us, we enjoy making folks look brilliant.