The local sports radio station is playing a series of ads promoting the newest get rich quick scheme: foreclosed real estate. There’s a testimonial from a guy who paid $25,000 for a house and sold it a month later for a $65,000 profit. It’s a reasonable assumption he was looking for three more 25 grand specials on his way home from the settlement.
This is great for those who have the cash on hand to pay for these discount houses. Period. No one else. It does not help the economy. The banks took a bath, and the construction industry isn’t going to build something new when you can pick up something almost new – that the original owner worked the bugs out of – for ten cents on the dollar.
It also doesn’t help those who are trying to get into the housing market for the first time, unless they were fortunate enough to have their financing lined up well in advance. More likely they’ll pay the speculator three to five times what he paid for it. His value add? Call me if you think of something.
What we have here is another wedge driving incomes apart. Those with money will make more; those without have probably already lost it through the mortgage payments they were able to make before the ARM went up, or the balloon payment kicked in. No sympathy here for them; they accepted terms they couldn’t afford. That’s life. Others shouldn’t get rich from their misfortune.
This is a golden opportunity for Congress to take action that won’t cost a cent, and will actually do some good. Since housing prices are going to fall anyway, let’s stabilize them and get some new homeowners set up. Impose a confiscatory tax rate on any property bought at a distress sale that is flipped in less than five years. If you bought it to live in, you’re cool. If you bought it solely to get someone else to pay you more for it, then who is it really hurting if you don’t make all that much off of it?
They won’t, though. Know why? Because they have money, and most people figure they will too, someday. They don’t want to lose their opportunity to screw someone else when it’s their turn. It’s what’s made