With all of the screaming headlines about a real estate bubble, falling home prices, and the plethora of reports on foreclosures, it was refreshing to read an article that attempts to provide a measure of balance to these topics.
Ben Stein’s article in the New York Times, September 9, 2007, It’s Time To Take A Deep Breath offers a fresh counterpoint to the recent negative press surrounding the real estate and mortgage marketplace. In Stein’s opinion, a little more balanced perspective may be in order as we attempt to understand just what has happened in this market, and more importantly, what might happen in the future. The article is thought provoking, maybe a bit cynical and yet a little optimistic.
Stein does not dispute the fact that a problem exists with some sub-prime mortgages and with an increasing number of loan defaults and foreclosures. He does state his beliefs that we have weathered similar (if not identical) problems in the past, and we will get through this one, as well.
Some worthwhile points from the article include:
On Beneficiaries of sub-prime mortgages –“Many thousands of Americans who would otherwise not have their own homes now have homes”.
On Sub-prime loan defaults – “The percentage of those (borrowers) who have defaulted is still fairly small, possibly 10 to15 percent, and maybe less. (And sub-prime mortgages are very roughly 10 percent to15 percent of (all) mortgages.)That means that the experiment of granting loans to less qualified buyers worked to a point.”
On Future defaults – Stein states that without intervention to forestall future defaults, it “will clearly be become a problem, although we cannot yet measure its impact”. Currently there are many initiatives being put forward aimed at fixing the immediate problem of variable rate mortgage increases by various government bodies, including the Federal Reserve and the Congress.
On Opportunity – He suggests that, “When everyone is crying the housing blues (it) is the time to buy. Bargain hard. In many regions, sellers want to hear any offer right now.”Note: For a similar view point, please read our last Reflections article, evaluating the present real estate market from a contrarian perspective.
The Bottom Line: For Stein, it’s that the problems in the sub-prime mortgage market and the resultant impact to the real estate market have been identified. Corrective actions are, or will be, put in place. In time, these problems will be fixed and the general health of the market will return.In the mean time, for all Buyers out there, opportunity awaits.
Ben Stein is a lawyer, writer, actor and economist, and an entertaining guy.