My friend Matt Dollinger recently commented on a post by the longtime real estate expert Steve Harney. Both were commenting on the doom & gloom article from Time Magazine on how homeownership is overrated. Steve Harney rightfully takes Time to task:
Again, they are simply arguing a miniscule point of an extensive research paper that proves the benefits of homeownership. Where is their research, their study, their expert testimony disproving this study’s results? They gave none because there is none. (Emphasis in original.)
Matt, in commenting on what Steve Harney wrote, and on the gloomy headlines from newspapers and magazines, suggests that real estate agents need to start focusing on how to answer questions from confused consumers:
We all understand that this is a difficult time for those in real estate… both consumers and agents alike. However, your job above all else, is to become the Trusted Advisor of those closest to you and choosing you to represent them. That means that you are responsible for being able to decipher fact from fiction and opinion from proof. There are many conflicting headlines out there today published by everyone from trusted sources like Wall Street Journal, CNN and many others. Your job is to sift through this material and create KNOWLEDGE from the DATA presented. Only by creating this knowledge and providing it objectively to your clients can you truly assist in their decision to buy, sell or invest in real estate.
I agree wholeheartedly with both Steve and Matt insofar as their trashing of Time’s “reporting” and their recommendations to real estate professionals. I do, however, think that the implications they draw are not necessarily what we’re going to face.
I believe that every real estate professional today, like it or not, has to become an amateur political analyst because it is well-nigh impossible even to understand what to make of conflicting headlines without understanding the political implications.
What If Time Isn’t Reporting?
Steve rather thrashes Time for its insipid “report” on the dark side of homeownership. And his point about Time’s incredible claims based on nonexistent mixed results is 100% on the mark. But where Steve assumes that Time is performing a journalistic function, thereby failing it horribly, I assume instead that Time is performing a public relations function, and succeeding in pushing the agenda of its friends in government.
The title should give away the game: “The Case Against Homeownership”. The writer, Barbara Kiviat, is a vegetarian “happily living in Manhattan” which tells me something about her socio-economic and socio-cultural status, as well as what personal views she might hold on the American Dream. Because I too lived happily in Manhattan in my late 20’s and remember my views on homeownership. Ms. Kiviat is likely a lovely woman, brilliant and funny, and probably lots of fun to hang out with — but I seriously doubt that she counts many middle-class Americans amongst her circle of friends.
I think we should take Time at its word. It isn’t reporting anything; it is making the case against homeownership. It is asking the readers (the ones who aren’t leaving in droves) to think that owning a home in America is a bad idea indeed. The article is an extended op/ed.
The question one should ask then is, Why? Why is Time Magazine interested in pushing the narrative that homeownership is a bad idea? Is it out of the goodness of their hearts? Their deep concern about Americans making foolish financial decisions that will ruin them for life? If so, the time to run that story would have been in 2005 (pun fully intended). Instead, as Steve Harney points out, in 2005, Time was singing a rather different tune.
The answer, I think, is that the Obama Administration is committed to changing the American housing policy. I’ve written on this before here, here, here, here, and here, as well as on AOL Housingwatch, so will save many innocent pixels. If you’re interested, go read those posts. Apparently, Time magazine, as part of the government-media complex, has decided to support the Administration in its objective to change housing forever.
Whenever you see gloomy headlines about housing, whenever you see Op/Ed pieces about how homeownership is overrated, about the risks to owning a home, etc., I believe you should naturally assume that the newspapers/magazines/bloggers are doing so for a reason — unless shown otherwise.
Political Awareness Required
Thing is, just because the government-media complex is pushing a particular storyline about housing and have no idea what they’re talking about does not mean that you can simply ignore them either. Consider, for example, this post from Steve Harney’s blog entitled, “Five Reasons to Buy A House Today”. In it, the “KCM Crew” makes five major points:
- Buying may be cheaper than renting
- There are tax advantages to owning
- Homeownership builds wealth
- Real Estate is a good longterm investment
- Experts Expect Price Appreciation Starting in 2011
All interesting points that we can debate in some other post. But what they all ignore is the possible impact from policy decisions.
Tax advantages to homeownership? Sure. Today. But note that Barbara Kiviat in her Time hit-piece specifically mentions this tax advantage:
As a consequence, Washington lavishes homeowners with special treatment. When they file their income taxes, they can deduct mortgage interest and property taxes. When they sell, they don’t have to pay tax on the first few hundreds of thousands of dollars in profit. In 1986 the tax code was rewritten, disallowing the deduction of interest from consumer loans like credit card debt, but an exception was made for the interest paid on a mortgage — a caveat that cost the government some $80 billion in lost revenue in 2009.
With the discussions going on in policy circles in Washington DC these days, any professional Realtor who tells a client to buy a house because of tax savings, without also mentioning that said tax break may be in jeopardy, is engaging in malpractice.
And of course, if the mortgage interest deduction goes, that changes the rent vs. buy calculation as well. It will also have an impact on longterm housing price appreciation. And I’d like to meet the expert who believes in home price appreciation in 2011 if the mortgage interest deduction goes away. That’s just one small piece of the housing policy puzzle; we haven’t even touched Fannie Mae, Freddie Mac, and what the government is thinking about doing on that front.
Fact is, there is not a single aspect of real estate that is not impacted — and heavily so — by government policy. This industry is a regulated one that exists in its current form only because of government policy.
This is not to suggest that no one is going to buy homes in the future. Nor is it to suggest that realtors should just climb under their bedcovers and wait for death to arrive. The market will change and adapt, as markets always do, to government policy. The smart brokers and agents will figure out a way, and the rest will find other employment in other fields.
It is, however, to suggest that the professional who wishes to follow Matt’s advice to remain a trusted advisor, who wants to sift through the headlines and create knowledge out of data, must today become an amateur political analyst. She has to know how to read between the lines in propaganda pieces, delve into the minutiae of committee hearings, think tank working papers, and little-advertised conferences. (Or find someone who will do all that and give her the low-down, like NAR’s political wing.)
Isn’t it great? As if you didn’t have enough things to learn and study to be an effective real estate professional….
-rsh
17 thoughts on “Like It or Not, You’re All Political Analysts Now”
Rob – as usual I’m tickled to be the one providing you with both real estate and political cannon fire.
Two points (and not necessarily pertaining to your wonderfully written post – if my brain worked the way yours does smoke would come out of my nostrils – and I feel sorry for your keyboard)
1) I’m not trashing the article. In fact in my full email that can be read here http://mattdollinger.posterous.com I go on to say that it is in fact a GREAT one-sided article. It brings up many very thought-out questions that all homeowners should consider (where the hell were these in 2002-2006???)
2) In my email I go on to say “It’s good for us to understand these things so that we can begin to formulate 1) responses to some of the questions and 2) to identify some of the factors in those clients that might NOT make them good candidates for home ownership.” Again, here I do NOT say that we should overcome objections or make cases one way or the other.
The agent that chooses to spin only one side of the argument in this discussion is not actually helping the real estate economy – more like postponing the inevitable for a later date. This is serious shit people. An agent’s paycheck should not come at the expense of a family’s a couple of years down the road.
I agree with what you’re saying here Rob that yes, government policy is going to effect the outcome of this down the road. However, that’s a conversation for you and me next week over barstools in Chicago!
See, I tried to keep the post free of _politics_ as much as possible out of consideration for your views. 🙂 We can talk about the wisdom or folly of the Administration’s housing policy plans next week.
But I think we agree on the larger point: you cannot be a “real estate professional” offering trustworthy advice without at least telling your clients about possible policy issues on the horizon.
Great article Mr. Hahn, for some reason I aways chuckle thinking of Mr. Hahn from Fast Times at Riverside High and Spricoli ordering a pizza into the classroom.
In any event, I know that we are on “our” time here so let me proceed. Your contention that we are all political analysts covers a lot of ground. I believe it touches on the core issue with 21st Century (no corporate flackery intended) media coverage of any sort. If you go back a few political elections we (the audience) used to believe that the media represented an independent “4th Estate” to report the news in a “fair and balanced” way. Rupert and his boys put an end to that reality, if it ever was a reality by coming outright and trumpting their political views in the open on news programs. It was heresy at the time, but it also helped to usher in the dawn of Web 2.0 reporting and ultimately provided everyone with a platform to express his or her own opinion/reporting of the “news” through their own political lens.
I think we are still trying to determine what news looks like today. I know when I watch tv, yes, I still watch tv on occasion – at least until I can figure out a cost effective way to stop paying cable – (C’mon Google TV, get it right) that there are a lot of things being reported on that I don’t consider news. I mean, Republicans want tax cuts to say in place and Dems want to spend more on infrastructure projects, is this really worthy of so much reporting space? Are the faux tv stars lives really worth reporting on? I guess it sells, so it is news to someone.
In any event, the president of Century 21 Real Estate LLC had some strong opinions on the TIME article – http://c21.in/9dGMOT (shameless flackery intended) so I felt compelled to share it with the group. It is news? You decide.
Keep up the insightful, thought provoking articles Mr. Hahn!
Sender – Message – Channel – Receive
Same As It Ever Was
Matt Gentile, Director of PR and SM
Century 21 Real Estate LLC
Hey Matt 🙂 I can’t seem to find the opinions from C21 — is there a separate link on your blog/site? Would love to see it. Or copy and paste in here if you’d like.
Real estate and politics has gone hand in hand for a long time but sadly some are just now realizing this. I am neither a Republican or a Democrat, instead I am a REALTOR. And I vote.
Hi Rob! Great post, at least from my perspective — as a homeowner AND as someone who works for the National Association of REALTORS.
I couldn’t agree more with you and Matt D that the TIME piece was one-sided. I started my career as a newspaper reporter, back when the point of journalism was to tell both sides of a story in as objective a fashion as possible — unless you were writing for the op-ed pages.
NAR’s Research Dept last month completed an excellent white paper on the many social benefits of homeownership that was very impressive. I’d be happy to share it with you if you’d like to have a look. There are lots of studies referenced in it that I think might be great fodder for you for some future posts.
Let me turn this conversation a bit. While national politics are crucial and impactful, much of the most tangible and “affect-able” politics are local – Boards of Supervisors, City Councils, and the various and sundry committees that are populated by those who 1) have the free time to devote to local politics and/or 2) are paid to have free time to devote to local politics. Local is where growth policies happen, water provisioning, infrastructure …. A client told me today that great Realtors provide information (not just data), context and analysis for their clients. Politics – local, state and national – are but
onethree more aspects of what great Realtors must know. Data is (relatively) easy. Making sense of it is another story.Those are the political races and segments that are among the most important to and for local Realtors and their clients. Here in the 5th District in Virginia, we have a very close race between a 1st-term Democrat (Tom Perriello) and a strong challenger, Robert Hurt. Here’s my question – what three questions would you ask them, given the opportunity? What three issues are *most* important to Realtors and homeowners/buyers? That became 9 questions much faster than I expected. 🙂 Also, I highly recommend Google’s new Election Tracking page.http://maps.google.com/intl/en_us/2010election/ratings.htmlGreat points, and great questions, Jim. A couple of points.
1. While it is true that state and local politics are extremely important, what’s amazing about the environment today is that national policy is being questioned. And these national policies undergird the industry as we know it today. So a local zoning board has enormous sway over things like building permits, infrastructure, etc. that impact home values. But national policy, of the kind I’ve been talking about, will impact things like how many willing buyers are even able to get financing, the terms of such mortgages, the financial cost of homeownership, and other major issues that the state/local folks simply cannot deal with. No city council can say whether Fannie Mae will or will not be around; HUD can and will.
2. As far as what questions I would ask the federal office-seekers… there are a few, but I’d start with these:
– What is your interpretation of “sustainable homeownership”? Do you support that definition or oppose it? If elected, how will you support/oppose “sustainable homeownership”?
– What is your position on PETRA and the associated TRA by HUD? Do you believe that those reforms should be limited only to public-owned housing units, or be more widely applied to Section 8 housing?
– What, in your opinion, is the proper role for the Federal government in the housing market?
– Do you believe tax policy should support homeownership via subsidies and exclusions, such as the mortgage interest deduction and the capital gains exclusion for primary residences?
– What would you like to do with Fannie Mae & Freddie Mac?
Like I said, depending on how they answer, there are tons of questions as followup. Chances are, politicians aren’t going to give you a straightforward, on-the-record answer. But it’s a start. 🙂
Im not a federal office seeker/holder, but ill pretend. You can tell because my answers are a little too straightforward…
1) My interpretation of sustainable homeownership sounds more like ‘suitable housing’…homeownership just aint for as many people as it used to be. It’s back to being more of a dream again.
2) Section 8 should continue to handle itself and those people. PETRA is helping to cultivate a field of future abundance…that being the rental market of displaced ‘middle class’ borrowers who dont have pristine credit and income verifications. Its gonna be huge and we don’t want to be overpaying a bunch of landlords for functionally obsolete housing, you know?
3) The same role as Fannie Mae and Freddie Mac were originally intended: To create affordable housing for the masses and mitigate risk on their behalf…except how Fannie and/or Freddie does this is about to change. They’re going to ‘mitigate some risk’ for themselves too. The federal Governments role will certainly change in one fundamental aspect- We gonna start getting paid!
4) It depends on what we do in other areas. Mortgage interest deduction likely gives way to a Government controlled expense. If were gonna take it in the back-end, were gonna make it in the front end.
5) Turn them into totally Government controlled entities that influence more control but own less of the risk. Any risk these guys do manage will come with higher premiums. Like I said, were trying to get paid.
Definitely too straightforward to be a politician, Jeff. Though if you plan on running for office, let me know. 🙂
A couple of things. Your answers to #1, #2, and #3 necessarily give rise to:
What is your view on Fannie/Freddie entering the multifamily mortgage market in a far bigger way?
That’s obviously what I think they’re planning on doing, since “create affordable housing for the masses” does not have to mean single family residences owned by the family living there. Your campaign platform would essentially mean the end of Homeowner Nation — which many real estate people would find… ah… objectionable I’d say. 🙂
And there are some provisions within PETRA that are of significant interest — like the expanded role/power of tenant organizations.
-rsh
I think you’re right on re: “does not have to mean single family residences owned by the family living there.”
This is one of the prongs of a multi-faceted approach where the Government achieves its stated agenda of getting the private sector back into the housing market. They’re going to make it very desirable for investors of a certain quality to participate.
I’ve spoken to this in writings of my own where I speculate that the Government via Fannie, Freddie or Frannie directly insures (portions of) home loans (instead of some ambiguous implicit guarantee) at the individual rather than institutional level…and charge premiums for such. Risk is shared through out the life of the loan by vetted parties. This would apply to multiple property types, not just Multi-Family
I don’t expect the real estate-ita’s to seek me out for an opinion, which I understand yet find ironic. Just because its a very bearish market doesn’t mean there isn’t money to be made and market share to be had. Anyone can play the upside in a Bull market, fewer can manage downside in a Bear market. Successful People will continue to figure out a way to succeed in the months and years ahead, its in their nature…this applies to real estate agents too. Its not like there won’t be properties that don’t need inhabitants.
The landscape is changing, its about positioning yourself ahead of the wave rather than getting swallowed up by it because you stuck your head in the sand and kept repeating to yourself that the recession is ending, housing will rebound, its a great time to buy , *rah-rah*- its all about attitude!!, we just need everyone to talk positively and everything will be fine… bullsh*t. I just read somewhere that the recession ended almost a year ago now. Pffft.
Further, NAR’s general position of housing market motivational speaker does more harm than good. They should focus less on being a sales organization and more of an educational one.
Well, that was quite the tangent.
Anyway, it is the end of ‘Homeowner Nation’, as in everyone’s somehow entitled to own a home. Sorry to burst anyones bubble, but most people simply cannot afford to buy a house . If you want to buy a house- demonstrate you make enough money, have enough in savings and pay your bills on time and… shablam, you can.
The Homeownership Nation bandwagon really didn’t work out too well. Like most drug/alcohol infused parties, they’re a blast at the time but the hangover really sucks… yet a few days later you’re ready to poison yourself again.
> any professional Realtor who tells a client to buy a house because of tax savings, without also mentioning that said tax break may be in jeopardy, is engaging in malpractice.
I live two hours from both a dormant volcano and a meteor impact site. If I sell a house without mentioning there’s a chance the scientists who deemed the volcano dormant were wrong or that history has shown Arizona is prone to meteor strikes (or at least one big one), does that make me guilty of malpractice?
Extreme examples bordering on ludicrous, true, but the point is I don’t think it’s the job of a real estate agent to *guess* at what might happen at some point in the future. Yes, the tax credit could disappear. And yes, it’s also possible the world will end in December 2012. Conjecture, both.
once again Rob, you have provided a feast for thought. there is no question that there is a push from some circles to tell people that owning their own home is no longer part of the american dream. however, i think that Kiviat’s own words speak volumes. i have heard similar statements before, but it never fails to “chap my hide”:
“…a caveat that cost the government some $80 billion in lost revenue in 2009”
this statement illustrates where the disconnect is. the people retaining more of their own property does not “cost” the government anything, because the government does not own that property. the idea that all wealth starts in washington, d.c. is a notion that must be dispelled. especially if we are to retain our american dream.
So, knowing all this, and supposing it goes from speculation, to possible, to probable, to reality. And taking into account the stuff you shared in preparation for you NAR presentation, what 3 things would you do if you were a real estate agent, or broker to position yourself for said cataclysms?
Rob, also, this should probably be a comment for your NAR presentation post, but my question is, being Rob Hahn, I imagine you could make a just as compelling case for a brighter future. I’d love to hear that one too, if you ever have time to share it.
Thanks.
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