The big picture on how to get property moving
by James Miller
My thoughts on the Real Estate, and economic, slow down is that people in today’s society are truly only worried about the monthly payments on their obligations.
The amount of debt doesn’t really bother most people as long as they can get what they want and keep up with those payments.
It is my contention that the only real way to trigger the sale of property thus kick start at least the Real Estate economy is be keeping interest rates low.
A low interest rate on a mortgage means a lower monthly payment, and the ability for people to afford a larger home.
We got into trouble with easy mortgages earlier when people were allowed to jump on teaser rates that increased after a short time, or negative amortization loans that deferred interest by adding it onto the principal balance.
When the other shoe dropped and these payments went up, borrowers faced the hard truth that they were unable to afford the home that they had bought, even though they were “qualified” for it.
I am not suggest that we bring back those sort of loan programs, but instead that inroads are made to keep mortgage rates low.
I would much rather see the government spending money and effort to keep borrowing rates low than spending money on a bailouts.
It is an economic fact that home buyers also spend money filling thier homes with durable goods. In this way a home purchase has positive rippling effects through the economy by creating demand for more tangible goods.
I have also heard (but fail to cite reference to) that a manufacturing dollar cycles through the economy seven times, as the manufacturer of durable goods needs to pay those who make his raw materials and that company must do the same. This creates jobs in many industries.
Compare that to a “service” dollar that makes only one go around in our economy, right into the pocket of person providing the service.
Think of an accountant or barber. There are no other materials that go into their product outside of their effort.
It is my hope that the powers that be realize the biggest bang for our buck will be through the continued reduction of interest rates.
Please feel free to share any thoughts you may have with regard to this idea.