Wednesday, November 2, 2011

The quiet invasion of America

Sometimes being right makes me sad and in this case it just ticks me off.  Consider this new article from the Wall Street Journal -

Foreigners' Sweetener: Buy House, Get a Visa

In essence it is new bi-partisan legislation that will further attract and reward the investment of foreign money into the purchase of land on American soil.

Remember what we used to say daily with our hands on our hearts?

"I pledge allegiance to the flag of the United States of America.
And to the Republic for which it stands
One nation under God
Indivisible with liberty and justice for all."

A nation can be taken in many ways.  The two most common are militarily and financially.  I am a  supporter of legal immigration but believe it should be done with knowledge, conditions, and with stipulations. My own great grandparents immigrated from Germany.  It is essential for someone who lives in America, and, especially one who purchases land to know and be required to pledge allegiance to the Constitutional principles this country was founded on.  Further they need to defend them as the needs arise. This goes beyond merely speaking the words and includes a history of life and practice dedicated to those principles.

In a review of my soapbox articles I warned that a foreign take over of land would be the next big step coming in the housing crisis.  Some time has passed and there are new readers to the blog so I wanted to raise the attention again hopefully as a siren to those who still love this country and in recognition of those who have served and died to defend and protect it.

Remember that banks now own outright over 12 million homes taken through foreclosure the last time I looked and they have one goal: to make money. 

Posted October 6, 2010
Did you see this article in Time Magazine? I thought the writer did a good job researching home ownership trends back as far as 1900 and outlined government involvement through tax advantages and loan programs. After Housing Bubble, the Dark Side of Homeowner Dreams - TIME.  In reading the comments it can be assessed that many were rattled by the article.  I'm not sure if it was her statistics or her conclusions that jarred people.  Although I don't necessarily agree with her conclusions I did think she brought up some valid points.

I am going to suggest that there is a plan in motion that is so diabolical that it would seem to come from a "I'M GOING TO RULE THE WORLD" action flick. This is the question that I have been asking myself lately and chewing on the possibilities. "After Housing Bubble..." What next? If you have been reading my previous posts on the U.S. Economy you know that I believe the housing crisis was no accident and part of a bigger plan. So what next? Where are we going from here? I would like to share a few observations and thoughts that I believe deserve further research.  If you know any resources or links you can point me in the right direction I would appreciate it.  I believe this topic is HUGE and this my first attempt to identify the next step of this UFO that is overshadowing the American Economy.  I can see it but am not yet sure what it is.

A short summary of the housing crisis so far and what I think Phase 4 may bring:

As an investor, what would you do if you owned a number of homes and the prices were down? Would you sell low or would you hold on to them and rent them out until prices and buyer demand went up again? If we can answer that simple question maybe we could figure out what is going on in the national economy. What works on a scale of a few would also work on a scale of millions.
Phase 1 - The bubble. Banks loosen credit requirements and people are investing all they have in homes whose prices are going up at a record pace.  Many are getting rich in the process. People try and buy before they go higher thinking that if they wait they will miss their chance at a home and a investment opportunity.  For some this proved to be true.  For millions more it did not.

Phase 2 - The bubble bursts. Millions of foreclosures with banks taking 100% ownership of properties and all the cash down payments and monthly payments that have been made. Personal credit ratings ruined so people will not be allowed to buy for 5 to 10 years.

Phase 3 - Home prices and interest rates lowest in decades but news articles saying that homes are no longer a good investment and individuals discouraged to buy. See cover story of Time magazine. The almighty credit rating of so many has been ruined by the first hit so even with money available they are unable to jump on the BUY LOW INVESTMENT OPPORTUNITY.

Phase 4 - This is where I'm watching for the next move. What I suspect is happening is that now that banks own so much property they will hold it and go into the property management business through secondary sources. Since they own the homes 100% the rent received will be pure profit (less taxes) and no equity is acquired by the resident. In a few years people have their credit magically improved and/or will realize that they have been scammed again and will start buying but prices will already be on the rise.

The scenario makes me shiver.  How much power and money is enough? 

One important note to make is that the term "home ownership" is very misleading. 

I was vividly reminded of this about 2 years ago when I forgot to make a $15 line of credit payment.  I received a notice from Chase that my home was now in default on my mortgage!  It took me hours of canned music and false starts to even find what the problem was and when I found the mistake I immediately paid the line of credit payment with the late fees.  But guess what?  That was not enough.  Chase had reported to the credit bureaus that my actual mortgage payment was late and my credit score was dropped by more than 100 points with a red flag on my mortgage even though my mortgage payment was on auto-deduction and therefore NEVER late.  I spent at least 60 hours making phone calls and writing letters and even contacted an attorney.  I was told that the way Chase reported it would stand even though I could clearly show two separate account numbers.  C'est l'vie. Am I still angry?  Not so much, but it did open my eyes and I started looking around and asking the logical question "What in the world is going on here?"  And then I got furious!  

Shrouded in mystery.
Understanding the economic crisis is like putting together a 1000 piece puzzle without the benefit of the box top.  By looking at the colors and patterns of the individual pieces little sections begin coming together.  As a person who enjoys good detective novels and has been employed as an analyst it is an interesting task.  The most fascinating part of the entire thing is that a person would want to believe that all are seeking the truth so that good solutions would be found.  Not true.  The goal of many is clearly to make the most money possible before the rest of us figure it out.  Politicians want to stay in power.  The media wants ratings.

Watching MSN and then FOX about the same news stories it is obvious that they are not reporting the news but that they are promoting an agenda. How can two recountings of "eye witnesses" be so different?  Sifting through the rubble of information and words is challenging.  No wonder so many end up turning off the t.v. and getting on with their lives.  Worse are those who repeat what they hear without question or thought.  To put it bluntly - they are almost all a bunch of liars.  Do you remember the old game show "To Tell The Truth"?  This is the game they are playing with the American people.  Most I believe (or hope) are not even doing it on purpose.  We can all miss the forest through the trees and have our own viewpoints interpret what we see.  I'm just as susceptible as any to this and that is one reason I try to receive information from both ends of the spectrum on any subject that interests me.

Unanswered questions.
It is amazing how difficult it is to find the answers to specific questions with all the abundance of information on the Internet.  To know if what I am referring to as Phase 4 I need answers to the following questions:
  1. How many homes have been foreclosed by bank?
  2. How many homes does the bank now own 100%?
  3. How does that compare to previous periods?
  4. How are these distributed between the BIG bankers and the community bankers?
  5. Are foreign investors allowed to purchase these homes?
  6. How many "qualified" buyers are there now?
  7. What is the average amount that credit scores have dropped since the crisis began?
  8. What % equity do home buyers now have in their homes?  Underwater, break even, equity percents?
  9. What is happening with bank owned homes?
  10. Are banks freeing up credit for private investors to purchase multiple homes if they meet credit requirements? 
  11. Are those who have been foreclosed have high debt balances from shortages of funds collected?
  12. How much cash money have Americans actually lost in down payments?  (I talked to a neighbor who lost $100,000)
  13. Why are the bankers fighting so hard against the efforts to provide home buyer bailouts?
  14. Why are these numbers so hard to find?  Is someone trying to hide something?
My theory.
If I am correct about Phase 4 we will continue to see a trend of bank foreclosures, stagnant loan modifications, media discouragement to buy homes, and the banking industry stepping in as "property managers".  Of course they will continue just enough "business as usual" to camouflage what they are doing.  Why split the profit if by holding their investment they can gain far more?  It's too early to answer the question but not too early to ask.  And watch.  Am I a conspiracy nut?  Not really but when I smell something fishy I begin looking for fish.  You may not agree but you can throw out the theory in a discussion and see if others get riled up.  I'm willing to take the rap as "the crazy one".

If you have any book recommendations or links to statistics on this subject please let me know.

Included are the comments from the first time this was posted that give more of the statistics that were located.


Olviia said...

Perhaps it's a rather cynical way of looking at it, but as long as there are property taxes, a homeowner doesn't own their home either. If they don't pay, "their" home can be taken from them even if it's totally paid off.

Personally, I'm looking into portable housing when we retire.

Carol said...

I talked to a metropolitan realtor and he confirmed that my suspicions were already happening including foreign businessmen buying large quantities of distressed real estate.

Practical Parsimony said...

As for "qualified buyers," I worked for a first-time buyers program. We worked hard to get people in a position to qualify for homeownership, including giving some of them $10K for a down-payment.

The other two people working with me had never owned a home or even considered owning a home. Both were half my age. I had owned 4 homes. I struggled to try to teach co-workers and clients.

All the clients had "Homeowner Dreams." I often wonder how many managed to keep their homes since there spending habits and credit scores showed they had financial problem.

Ah, the stories I could tell! I am not sure that "qualified" worked except on paper. I saw no mental or fiscal changes. Besides, we could play with numbers to help people with their front end and back end numbers. Maybe I was naive to think that "fixing" scores and helping people get a foot in the door was a good thing.

Carol said...

Sounds like you are referring to the lending practices that were Phase 1 of the plan. People were encouraged to take on debt without the know how of managing it. Your organization at least took the extra steps to try to educate and prepare people for what they were getting into.

Barb Friedberg said...

Carol, There is lots of press about the difficulty for those in distress to complete a refinance due to the sheer volume. There are so many missteps across the entire industry, it's hard to know where to start. Personlly, if one has the resources, I believe now is a buying opportunity.

Carol said...

Yes, Barb, I wholeheartedly agree. I just found this article that some readers may find helpful.

Practical Parsimony said...

Carol, Phase 1? We took them through the whole process. I had to be present when the home inspector was at the home. We went to the closing. We had to okay whatever the homeowner wanted to do. We could and did threaten to not give them the down payment in order to keep them from doing something foolish. We stood up to the realtors!
A few women were willing to allow their incomes to be figured in with a guy's income and she was willing to be on the loan. But, her name was not going to be on the foolish and we just did not allow it.With these kinds of decisions, I wonder how many even managed to pay the house payments.

Sure, we educated and prepared them. They had to listen to us. But, left on their own, if they continued with the awful decisions they tried to make, aaaah, I wonder.

We took roll at a financial literacy class that was mandated. No attendance=no loan!

As long as we send our production overseas, Americans won't be able to buy distressed properties.

Shawn Watson said...

Okay Carol,

This article completely captivated my attention. I am intrigued that you feel banks will go into the property management business, but the rationale you lay out is so clear that your argument is quite compelling.

Does your theory assume that the economy will gradually improve? If so, how would a quicker recovery impact your hypothesis (Phase 4). For example, as we become better qualified to "own homes" as a nation, I would think there would be plenty (formerly burned or not) who would like to own a piece of the market again.

Also, although I can't find a legitimate source, I have read that 30% of homes don't have mortgages (per Census Bureau)...I can't find the link though. I was wondering whee you got the 2% number from.

Carol said...

Shawn, I believe the number came from the book titled Your Money Makeover included on my book list. I would have to reread it to be sure. The author made the statement that 98% of Americans are only 90 days from homelessness if they lost their income (paraphrased). I was dumbfounded when I first read it. While I recognize that reserves play a big part in the time frame her point that only 2% actually have their homes paid off stuck with me. There was a time where I was reading so much financial info that I may have the source wrong. Another "fact" I would like to verify. That was one of my points in listing the questions. We hear the same statistics over and over but when we begin asking questions that are off the beaten path the answers seem shrouded in darkness or at least very difficult to find.

As for the question about improvement we first have to define what that means. Some think it means going back to the big pre bust credit availibility and massive consumerism. In my opinion improvement means minimum debt (for individuals and the nation), adequate reserves, American production thriving to meet our own needs with exports exceeding imports (profitable investments), and those things in the hands of individuals not huge conglomerate business. Levels are flexible but the direction is forward. Too big to fail is just too big.

Obviously the questions are big enough that they are difficult to briefly give answers but books like The Millionaire Next Door give an excellent model of how we can prosper as individuals and then apply it to a national level. A nation is only as strong as the individuals within it.

A prosperous individual can own one home, then two, and then more. This keeps our land and real estate in the hands and control of private individuals and they in turn provide housing to those still on the path up. Land is the createst resourse we have, without it we would all starve. It is individuals who keep the government and business strong, not the reverse.

Would love to see any statistics you are able to locate and I will continue to search.

Carol said...

To get the total percentage of Americans that own their homes outright we need:
% of Americans households living in rental units
% Of Americans with a home with outstanding mortgage balance.
% Of Americans in owner occupied home that is paid off.

According to the U.S. Census the 33% of pay off only takes those who are living in owner occupied dwelling into consideration. Renters are not included when calculating the % so it only measured a fraction of the entire population.

Shawn Watson said...

Thanks for the clarifications and the links. I'm glad to have the references and the numbers now!

Everyday Tips said...

If I owned four houses and the prices had plummeted, I would probably cry. However, I would only own four houses if I was using them as rentals, so I would have to be super-aggressive at renting them out and probably lower my rental price some.

If I did have some extra money laying around, I would be torn between paying off my mortgage and buying some rental property.

I feel terrible for those trying to legitimately sell their home because their home prices are just getting destroyed by the number of foreclosures and short sales that are available. (At least around here.) Until the foreclosures stop, the market is going to be rough.