Editorial by Stefan Swanepoel
I would like to share with you the fantastic afternoon I had this last Saturday. My wife and I had the privilege of being invited to the two hour Saddleback Civil Forum with Senator Barack Obama and Senator John McCain. This was the first time these two presidential hopefuls, and expected nominees for the Democratic and Republican Parties, shared a public stage.
Rick Warren, author of “A Purpose Driven Life,Ã¢â‚¬Â and pastor of our Church, Saddleback in Lake Forest, had organized for Obama and McCain to come and present their views on important issues.
The Atypical Conversation. This was not your usual political debate with read-the-teleprompter canned speeches on pre-approved political questions. No sir. This was about the real stuff Ã¢â‚¬â€œ the big subjects Ã¢â‚¬â€œ topics we usually do not hear about in a presidential face-off.
On Sundays, Rick is usually dressed up in a Hawaiian shirt, but this Saturday was different Ã¢â‚¬â€œ he was in a dress shirt, no tie and suit. Rick himself is an excellent and inspiring speaker but the afternoon wasn’t about him.
During the forum Rick first posted questions to Obama before asking McCain the same set of questions. Topics covered aspects such as personal values, religion, abortion, marriage, education, evil, stem cell research, energy and their respective vision for the United States.
Brokerage economics is undergoing a massive reordering. The way Brokerage firms make money is changing faster than our ability to absorb and adapt to the demands of the New Real Estate Economy.
To be “REALonomical” actually means something. REALonomical enterprises recognize the facts surrounding their business models and how those facts play out in real world situations, producing predictable and sustainable ROI. REALonomical is a brokerage mind set and it has something to do with how we model the financial aspects of a company in light of the Third Economic Wave; The Consumer-Centric Era.
It was Once a Simple World
During the First and Second Economic Waves of the real estate industry the model math was fairly simple and easy to interpret. From this interpretation we developed strange economic terms we called “desk cost” and “per person productivity” (ppp). Such economic models delivered notions of profitability because we could run formulas for operating our “offices” and hypothetically project our margins. Our simple formulas appeared as:
Gross Commission Income (GCI) – Cost of Sale (COS) = Gross Company Dollar (GCD). From the GCD, expenses were paid and profit, if any, was realized.
It was a simple world then. Broker/Owners understood how to create profit. Physical space was a huge part of the formula and for many years “cyber” was something we read about in Batman comic books.
Too much of the real estate industry is still living in the former model while being confronted with the transformative power of the cyber model.
Can the 2008 Housing Act Stabilize and Turn the Real Estate Cycle Around?
Who would have only 5 years ago expected that we would be staring down such complex and turbulent times in real estate?
Last week, President George Bush signed The American Housing Rescue and Foreclosure Prevention Act of 2008 (the Housing Act) into law. It is the most sweeping housing legislation since the Great Depression. The new Act authorizes the Department of the Treasury to stem the tide of home foreclosures and provide a lifeline to mortgage lenders. With inventory in many large cities sitting at almost a one year level, and foreclosures expected to surpass 6 million by 2012, they have a huge task ahead.
1. $300 billion in FHA loans for Homeowners to Refinance
The Act could avoid foreclosure through refinancing into lower-cost mortgages insured by the Federal Housing Administration (FHA).
THE GOOD NEWS: It will help an anticipated 400,000 people whose loan servicers are willing to accept a write-down on principal.
REALITY: To qualify, borrowers must have a relatively high level of debt to income, use their homes as primary residences and agree to share any profits from any eventual resale with the government.
2. $4 billion to Buy and Rehab Foreclosed Homes
CLIFF NOTES: The Act offers $4 billion for local communities to buy homes at a discount, rehabilitate them, sell them and use profits for neighborhood development.
THE GOOD NEWS: This could help many low- and moderate-income families in holding on to the American Dream.
REALITY: Should reduce crime, especially in the inner city and low income areas.
3. New Home Buyer Tax Credit of up to $7,500 for Qualified Buyers
CLIFF NOTES: It’s not really a credit but really a loan.
THE GOOD NEWS: It’s refundable credit and it’s a zero-percent loan. An estimated 3 million buyers could be eligible for the tax credit.
REALITY: You got to pay it back.
4. New Deductions for Real Property Taxes
CLIFF NOTES: New deductions, in addition to the existing standard deductions.
THE GOOD NEWS: It’s effective immediately.
REALITY: These are Ã¢â‚¬Å“above the lineÃ¢â‚¬Â deductions.
5. Change in Vacation-home Status
CLIFF NOTES: The personal resident exclusion is still good on your personal home but not on your vacation home or rental property converted to a home.
THE GOOD NEWS: It’s effective until Jan. 1, 2009 so you still have time.
REALITY: The decade-long free ride is over.
So is this a real rescue of the real estate and mortgage markets or only a bandage to help us through till we have a new President next year? What do you think?