Who disagrees that house prices will continue to fall?
Real estate businesses disagree, because they don't make
money if buyers do not buy. These businesses have a large
financial interest in misleading the public about the
foolishness of buying a house now. The NAR has harmed America
far more than terrorism did.
Real estate is all about deception. There is no transparent
market because bids are never published, unlike the stock
market. There should be a law to change that, but the NAR is one
of the largest lobbyists in Congress, so don't expect any
changes soon.
- Buyers' agents get nothing if there is no sale, so they
want their clients to buy no matter how bad the deal is, which
is the exact opposite of the buyer's best interest. Agents
take $100 billion each year in commissions from buyers.
Agents claim the seller pays the commission, but always fail
to mention that the seller gets that money from the buyer.
Think about it: who brings the money to the table - the seller
or the buyer? All money comes from buyers. No buyer, no money.
If a stock broker were to charge 6% on the sale of stock,
he would quickly go out of business. Real estate brokers don't
do much more than stock brokers, so why should you give up
nearly two years of your working life earning money to pay a
realtor for the few hours they may put into helping you buy or
sell a house? 6% of the 30 years it takes to pay off a house
is 1.8 years of donating your working time to realtors.
There are good buyer's agents who really believe they are
helping the buyer, but they're in denial about their conflict
of interests. Author Upton Sinclair had a great explanation
for this: "It is difficult to get a man to understand
something when his salary depends on his not understanding
it."
- Mortgage brokers take a percentage of the loan, so they
want buyers to take out the biggest loan possible. Even worse
- mortgage brokers get paid according to how bad the
deal is for the buyer. The worse the deal is (higher interest
rate, points, fees, etc) the more the mortgage broker gets!
- Banks got origination fees and then sold most mortgages,
so they did not care about the bankruptcy of borrowers. They
would lend way beyond what buyers could afford because they
thought they risked nothing if the buyer were to default.
Banks sold most loans to the government agencies Fannie Mae or
Freddie Mac. The conversion of low-quality housing debt into
"high" quality Fannie Mae debt with the implicit backing of
the federal government was the main support for the housing
bubble. That is ending as Fannie Mae shrinks.
The other way for banks to dump the risk of loan default
has been the Wall Street market for mortgage-backed
securities. Now that mass foreclosures have eliminated the
loan-resale market, banks are under pressure to increase loan
quality.
- Appraisers are hired by mortgage brokers and banks, so
they are going to give the appraisals that mortgage brokers
and banks want to see, not the truth. Appraisers that kill a
deal by telling the truth do not get called back to do other
appraisals.
- Newspapers earn money from advertising placed by realtors,
lenders, and mortgage brokers, so papers are pressured by that
money to publish the real estate industry's unrealistic
forecasts. Worse, realtors have a near-monopoly on sale price
information, and newspaper reporters never ask realtors
hard questions like "how do we know you're not lying about
those prices?" The result is an endless stream of stories
reporting that the National Association of Realtors (NAR) says
it's a good time to buy. Asking the NAR about housing is like
walking into a used car dealership and asking the salesman if
today would be a good day to buy a car.
- Owners themselves do not want to believe they are going to
lose huge amounts of money.
What are their
arguments?
