I noticed it yesterday when I logged in to my credit union account, but didn't take the time to let it sink in... This evening however, I am taking the time, and I'm mixed with thoughts of disbelief along with the immediate understanding of human nature, the state of the current housing market, the banking/lending culture, and ultimately today's social, economic, and government policy cultures so prevalent in our country.
Here is the advertisement:
"Home EQUITY Line of Credit - 1.99% APR*
Not Just For Home Improvements...
But for All of Life's 'IMPROVEMENTS'"
And there next to the "All of Life's 'IMPROVEMENTS'" slogan were pictures of an airplane and airline tickets (signifying the vacation you need to take...spending your home equity on), your "wish list" (signifying all of the things you want to do in life...spending your home equity on), books and a graduation cap (signifying your kids college tuition...spending your home equity on), and an umbrella with a dollar sign (signifying that you should have cash ready for life's emergencies...oh sorry, did I say cash??? Oops...home equity).
Just a small reminder in case anyone has forgotten that we're still desperately trying (and failing) to recover from the last bubble/downturn/recession/depression - SPENDING HOME EQUITY MEANS GOING DEEPER INTO...wait for it..here it comes...DEBT!!!!!!!
Sorry for the all CAPS there, I really don't like using them unless truly necessary, but at this point, the emphasis is completely legitimate and truly necessary. This is not a soapbox, or a lecture, or me needing to hear myself speak (yes, I am a Real Estate Agent, but far from typical as those who know me will verify).
This post is because I really truly care about people, people in my community, people in my sphere of influence, people in this nation that I've grown up loving. This current "recovery" from the previous Real Estate and economic downturn has shades of schizophrenia all over it. A true recovery has the foundations of a strong economy - job growth, business growth, real GDP growth. Unfortunately we're not seeing any of that. The only reason the Unemployment Rate keeps ticking lower is because unemployed people keep falling off the unemployment rolls because their time has run out or they've stopped looking for work altogether.
Now don't get me wrong, Real Estate prices are going UP. We are in a rare window, and I highly recommend capitalizing on the opportunity. It's a great time to sell into this buying strength, and it's actually still a great time to buy as we are not yet too far into the upswing of the price pendulum, AND we're at all-time lows in mortgage rates...
We're in this Housing Bubble 2.0 due to two main factors: 1) inventory/supply shortage due to government manipulation of the markets through lawsuits and legislation against banks and lenders which has resulted in last year's freeze on foreclosure actions, choking off distressed property inventory; 2) heavy buying pressure from Wall Street, private investor groups, and hedge funds which are buying up as much Real Estate as they possibly can (for many valid reasons which will require a separate blog post for me to detail in the near future), which is crowding the normal homeowner buyers in the market. These two factors are combining to create one serious housing shortage...which is strongly driving prices higher.
Even though all of this is built on a very shaky foundation, I do not see anything changing any time soon to slow the pace of appreciation and price growth for at least another couple of years. And as we've seen before, markets can remain irrational for a long time...
Now to bring it all back full circle from where I started in the rant above, seeing the credit union Home Equity Line of Credit ad made me realize the confirmation that we are heading full steam ahead back into Bubble-Land. Easy credit is the nitro fuel that will send us there again, and the banks are ready to send us there again too, capitalizing on the new found irrational exuberance 2.0... But more than that, banks see the current state of housing, and based on the return of strong home appreciation, they're betting big already on Bubble 2.0.
Here's the takeaway - all of my friends, family, neighbors, past clients, current clients, and future clients - PLEASE be very wary of debt and learn from the very hard lessons we've all gone through in only these last 5 years. I'm all for prosperity and growth, dreaming big, and pursuing and fulfilling our big dreams... But please be careful with DEBT. Debt is a dangerous tool, be very careful how you use it. The use of leverage, while very powerful, must be used with knowledge, understanding, and discipline. It can be used for your benefit, but it can also turn ugly if not managed properly with good risk management and a viable exit plan.
More to come soon. May we all be blessed in our efforts and endeavors going forward, and may God bless America!
Mike Rosenthal, REALTOR®/CDPE®
Direct 818-968-2601
mike@conciserealestate.com
www.ConciseRealEstate.com - full service real estate site
HelpingSoCal CDPE site
DRE Lic# 01789852
Experience you can count on! Over 100 Standard, Short Sale & REO homes successfully closed over the last 4 years ($40,000,000 in sales volume)
