MAGIC MARKERS

Hi,


Someone asked recently when the housing crisis is likely to be over. Despite government public relations reports, the answer is not good. There is no magic wand that will cure the sickness that ails housing and the constant fiddling by politicians just constitutes a longer wait to find out what true house pricing constitutes.


Because that's the real key to all this. The MAGIC MARKERS used by mortgage companies, bankers and the government set prices at unrealistic rates. How to ascertain this? Well, let's step back in time just 50 years. That seem like a long time to you? It's not when you consider that prices rose far more slowly in the years preceding the 1960 time frame.


In 1960 the average then luxury home in a good Florida neighborhood (a 3-BR, 2 bath home of 2000 square feet) sold for $12,500. That's right: twelve thousand, five hundred dollars. That same home today EVEN AFTER THE RECENT REDUCTION in home prices in the same neighborhood (which is now an OLD nice neighborhood) sells for around $500,000. This price change is similar even for lesser homes.


Not being a mathematician or statistician, even so it is clear that an increase of $9750. a year during good and bad times for 50 years is rather strange but that's exactly what that home would have had to experience to reach $500,000.


SO, WHAT IS REAL VALUE????????? How much is that home really worth? It was obviously built in 1960 to sell at $12,500. Did the owners provide almost $10,000. of REAL HOME IMPROVEMENTS over the 50 years???????? It's doubtful. What caused the house to become more valuable than it was originally?


If you bought a $3,000. car in 1960 and used it sparingly for 50 years with no other owners, it's not going to be worth anything even in pristine condition WHEN YOU TRY TO SELL IT.


Seem strange that a house probably used by at least 10 or more owners in 50 years would BECOME MUCH MORE VALUABLE. Yes, land cost do rise as less land is less available but neighborhoods change so that some become less desirable and should drive house prices down. None seem likely to reach original cost. IS THERE A HOUSE at or near the same value as 50 years ago???????? It would be very difficult to find.


How does a house appreciate beyond real value? Regular repairs wrongly seen as Home IMPROVEMENT are added to the selling price.


CARS constantly need repair or fuel and guess what? CARS DEPRECIATE (lose value-a lot of it). You can't add those costs to the sale price of the car or a home.


Added to the home's selling price is the profit many owners AND SPECULATORS feel they deserve JUST BECAUSE they were smart enough to buy the home.


Then there are those real home improvement loans (additions to square footage) that Banks like to add to a mortgage so that the home will appreciate in value. Those improvements deserve to be figured that into the seller's price. However, many times the money is spent on repairs and not true home improvements.


Taxes have have a role in increasing home prices beyond real value. When tax appraisers saw houses selling for more than the original cost, they scratched their heads and said, 'we should be able to tap into this extra money' and THEY DID. Houses in the past were not treated like the stock market but were taxed on the basis of what they originally cost plus genuine home improvements producing a more realistic home value than in the past 20 years.

They decided to assess a home on the basis of surrounding home sales or just estimate values on a similar basis. NOT FAIR???????? RIGHT!!!!!!!!!! If you choose to live in your home for a long time and have never sold it, you are taxed on the basis of someone else's profit taking. That's how they build fancy courthouses. Those tax values soon became the accepted lowest value of homes in an area. Not necessarily the selling price but the taxable price. AGAIN WE HAVE A MAGIC MARKER.


WHAT DOES ALL THIS MUMBO JUMBO really mean??????????It means, my friend, that the original building cost (less wear and tear if any) and actual home improvement is the real value of your home and the remainder of the selling price or value is based on BLUE SKY. That's what nefarious profit used to be called. Not even pools often qualify as major improvements, no matter how it's improved your life!!!!!!!!!


THERE JUST IS NO OTHER REAL PRICE TO BE FOUND!!!!!!!!!! Your current home value has been based on all that BLUE SKY PROFIT made by former owners; and your TAXES are based on the BLUE SKY PROFIT made by OWNERS of other homes around you. They learned this concept from the stock market and used it because the profit in homes was deemed long-term equity value.


What does it mean when they talk about the revitalization of the home market??????????Mostly, it's about more MAGIC MARKERS. Here's the real view of a home in the last 50 years.


It was seen as a "GREAT, LONG-TERM BUILDUP IN EQUITY VALUE". In other words you have been PLAYING THE STOCK MARKET OF HOME VALUE!!!!!!!!!!! Unfortunately, you were not advised that this was a RISK situation just like the stock market. You were led to believe that your home would continue to accrue equity value and you would not have to worry about loss. Thus many folks lost retirement income that probably should have gone into gold.


PLEASE, IN THE FUTURE remember the lessons learned from the downturns in our economy.

THERE IS NO SUCH THING AS "PROFIT WITHOUT RISK"!!!!!!!!!!!!!

It usually affects the high end of profit the most. However, this time because HOME IMPROVEMENT LOANS were given to home owners on their lower end mortgages, they also took heavy hits with not only on OVERBLOWN mortgages but loans added to those contracts that kept their pay off low.


What will happen to home values?????????? I wish I could answer that one. There's no telling what MAGIC MARKER is up some one's sleeve to convince folks that all is well. The demand for housing has decreased because those who understood what was entailed in home profit no longer see the lure of long-term growth in equity value. New building is down and as a result we have a declining job market.



WE SIMPLY HAVE TO BEGIN ONCE MORE TO SEE A HOME AS A SHELTER AND BE DAMNED GLAD OF HAVING IT!!!!!!!!!!!



The statisticians say that home values have decreased 30% (considering how far off real value they have become--that is a conservative amount); that some $6 trillion home equity value has gone back into that BLUE SKY (that's an imaginary land by the way--MORE MARKERS); HOUSEHOLD wealth has decreased by about $170 billion, according to Goldman Sachs and a million or so homes are not being built annually which has removed 5 million jobs and lowered consumption, according to Mortimer Zuckerman in the Wall Street Journal. It's going to be a matter of letting housing seek its own equilibrium, according to Zuckerman.



A HOME AS AN AMERICAN DREAM has to return to our American ideals NOT THE HOME AS AN AMERICAN PROFIT MAKING VENTURE. Let the GREEDY REMEMBER that WHAT GOES AROUND DOES INDEED COME AROUND!!!!!!!!!!



cheers, connie