This didn't take long. The National Association of Realtors (NAR) -- you know, the trade group that spends millions lobbying our legislatures in order to ensure those fat, 6% cuts on residential housing sales -- is in favor of President Bush's proposed housing bailout, beginning with Federal Housing Administration changes and including the proposed tax break to be given to debtors whose banks hand them a pile of money in the form of debt forgiveness.
NAR President Pat Combs details the organization's alleged concern for homebuyers here. Of course, the NAR attempts to couch this support not for what it is (an appeal to the government to save its own skin by reinflating the housing bubble that put a Cadillac in every garage and a Rolex on every wrist), but as an appeal to humanity: "Many families who have been making their mortgage payments at the starter rate but were unable to keep them up after the loan reset have been unable to refinance through the FHA ..."
That's true, but it ignores the reasons we got to this tight spot. And foremost among them were years' worth of Realtor press releases touting rising home prices, but also "affordability." The latter was the appealing buzzword for exotic mortgages with teaser rates -- the only thing that made these bubbling assets affordable. The myth about housing always increasing in price is, of course, an old NAR favorite.
By bum-rushing buyers into bidding wars in hot markets (I saw one from the inside, once) and issuing positive spin to gullible mainstream media outlets, the Realtors could create a self-fulfilling prophecy, for a while. But now the roof is on fire, as all of those exotic mortgages threaten to toast the NAR's crop of gullible buyers. Unfortunately for them, an inevitable result of the NAR's getting people to bid up houses and buy with zilch down payments is that far fewer homes and buyers qualify for FHA assistance.
Although the NAR helped make this mess, now that its 6% is on the line, it wants the taxpayers to clean it up. The press release is worth reading if only to see the depths of the NAR's ignorance. It calls for the president and Congress to deliver a dose of medicine that would kill the patient entirely, including raising FHA loan limits and reducing or eliminating cash down payments altogether.
Do these yahoos still not realize why housing is tanking? It's precisely because the loans that many Realtors jawboned people into taking were too big and had too little equity. As a result, the derivatives backed by those loans are, in some cases, all but worthless. Bear Stearns (NYSE:BSC), Goldman Sachs (NYSE:GS), Countrywide Financial (NYSE:CFC), Impac Mortgage Holdings (NYSE:IMH), Accredited Home Lenders (NASDAQ:LEND), not to mention BNP Paribas and dozens of other banks all around the world, can tell you just what happens when no one believes in the quality of the real-estate-backed derivatives, and there's no equity to fall back on: The market for the derivatives disappears, and there's no more money forthcoming to make new loans.
If the NAR gets its way, the people of the U.S. who didn't go out and spend irresponsibly during this housing bubble will be tasked with stepping in to guarantee the bad loans of those who did, spurred by the 6-percenters at the NAR. That might not even be enough to reanimate the dead monster bubble, but it might buy those Realtors a few more months of commissions.
This kind of shameless, pecuniary self-interest should surprise no one. After all, it's tone-deaf real-estate agents who came up with the infamous "Suzanne" advertisement that now serves as the poster child for the triumph of greed, duplicity, and bullying over old-fashioned financial reason.
That the greedy and thoroughly discredited NAR supports these bailout measures ought to be the final proof that they are not in the public interest. For the rest of the no-bailout case, see my comments last Friday.
At the time of publication, Seth Jayson, a top-10 CAPS player, had no shares of any company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.
