Does the Real Estate Industry Deserve a Bail-Out?
September 10, 2007 |
Over the weekend, I saw a post in my RSS reader from the Inman Blog that really got to me. It concerns the current state of the real estate industry, and how it has affected the residential construction industry specifically. The main story here is that the National Association of Home Builders sent out a desperate plea for help from the government and private investors to help them out of their current financial doldrums. From the NAHB:
“In light of the significant decline in employment reported today, NAHB and its 2,800 board members call on the Administration, Congress and federal regulators – along with stakeholders in the private sector − to work in concert to prevent further deterioration in the housing market and erosion of growth in the nation’s economy. Today’s job report jolted Wall Street, demonstrating the paramount importance of restoring consumer and investor confidence in the U.S. economy and housing market.”
This makes me sick. Here’s why–
First and foremost, this is America. One of the most beautiful things about America is that people are free to succeed to any level they are able to attain. One reason why this is possible is because people are also free to fail miserably. One of the things that drives success is, in fact, failure. Without the ability to fail, it becomes much harder to succeed. Removing failure from the equation will make people instantly complacent, and potentially lazy. Not much good can come from such an environment.
Secondly, business involves risk. The NAHB is essentially asking the government to step in and alleviate the risk that its members knew beforehand was inherent in the market. The fact that many of them ignored the risk and continued to operate as if the milk and honey would never stop flowing is their fault, not the fault of the government or private investors. As painful as it is to have to lay off employees and issue negative earnings reports, actions must have consequences. Suffering such consequences should serve to remind people of what can happen so that they don’t make the same decisions in the future. Noticeably absent from the NAHB is any mention of what its members are going to do to help. In order to change things, they must be willing to accept some of the responsibility. Especially when they were direct participants in the first place.
Third, the NAHB has the audacity to ask for help from “stakeholders in the private sector.” When builders fail, or have to take losses instead of profits, who do you think is losing the money? Those stakeholders are. Correct me if I’m wrong, but I don’t recall the NAHB telling investors to be more cautious when investors were pouring money into their members’ corporations, sending stock prices soaring. Now that times are tough, and builders are over-extended and losing money, they want those same investors to bail them out? Gimme a break. If I had money invested in these companies and they came to me with their, “brother, have you got a dime?” speech, the reply would be, “I gave you a dime, you squandered it, remember?”
Of course, investors share some responsibility here also. There were plenty of investors who suffered a severe case of over-exuberance and consequently ignored the risk and put too much money into the construction sector. Those investors are being duly punished for their transgressions as we speak. Losing money is never fun. That is the way the market is designed to work– you make good investments, you make more money; make bad investments, and you could lose it all.
I am well aware that there is collateral damage here that no one is happy about. There are tens of thousands of people who are out of work because of the down-turn in the real estate market and mortgage industry (there are about to be 12,000 more). Hopefully, the losses have been significant enough that those who helped cause them will act more responsibly in the future. For those who have lost jobs, it sucks, to be sure. Hopefully they will be able to find new employment sooner, rather than later.
The reality of the situation is while the real estate and mortgage industries are receiving all of the attention right now, they are not the most significant portions of our national economy. While the current downturn will have some negative effect on the overall economy for a period of time, we won’t be entering any Great Depression. Other industries have suffered similar downturns throughout history, some even more significant, and guess what? We’re all still here. It’s funny how that works out.
So to answer my original question, does the real estate industry deserve a bail-out? Heck no.
And the #1 reason why is entirely selfish– I know that if I go out of business tomorrow, it is through no fault of the government or the private sector; and neither the government nor a single private investor is going to care. That’s exactly how it should be.
[tags] real estate, realtor, charlottesville, virginia, nahb, bail-out, real estate bubble [/tags]
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9 Responses to “Does the Real Estate Industry Deserve a Bail-Out?”
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Disclaimer
My name is Daniel Rothamel. I am a licensed real estate agent in the Commonwealth of Virginia and a member of the National Association of REALTORS. As such, I adhere to a strict code of ethics and all laws with regard to equal housing, which is reflected in the content of this blog. My broker is Strong Team REALTORS, 86 Joshua Lane, Palmyra, VA 22963; (434) 589-5800. My VA Real Estate License number is 0225 077325. All of the opinions in this blog are mine, unless otherwise noted.
Bravo! Daniel
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I just knew this one would catch the attention of the BawldGuy!
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Excellent! No free lunches…
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Laurie,
That’s right. Becuase Milton Friedman said so.
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Hey Daniel! just stopping in to say Hello!
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