This from my Arizona Republic real estate column (permanent link):
When I was a kid, my Uncle Jack, my mother’s oldest brother, told me a story I’ve never forgotten. He was at a little county fair way out in corn country. Nothing special, just beauty contests for hogs, cheesy little rides and sticky, sugared confections.
Late in the day, the ice cream vendor decided to pack it in, announcing that he was giving away what was left of his inventory. People elbowed their way to the front of the crowd, so eager were they to get something for nothing. They walked away with the ice cream piled into their bare hands, rushing off to their cars, leaving a trail of melted drips behind them.
The lesson I took from my uncle’s story was that those folks didn’t really want ice cream. They were willing to get themselves dirty, and to get their vehicles dirty, just to have something for free. Most of them probably didn’t even eat the ice cream, and they certainly couldn’t have enjoyed it. Imagine trying to inhale a glutton’s quantity of chocolate-fudge-swirl before it melts all over your clothes.
Could that be what’s going on right now with the $8,000 first-time home-buyer’s tax credit? I happen to be carrying three listings that are undeniably “investor’s specials” — which means they’re a good buy, but they need a lot of work. Even so, my phone is ringing off the hook with agents trying to sell those houses to owner-occupants — folks with very little cash trying to get an FHA loan so they can buy a house, thus to get $8,000 in “free” money.
Do those buyers really want homes, or do they just want that free money? What will happen to the properties when the $8,000 is spent? Should we dial the clock back to 2006 to see if anything looks familiar?
Meanwhile, the National Association of Realtors is campaigning for even more “free” money to bribe even more otherwise-unmotivated buyers. The only thing that could make the deal sweeter would be a double hand-full of “free” ice cream.
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Michael Cook says:
This is an interesting concept. $8,000 is a bit more valuable than $3.00 ice-cream, so you would probably expect the reaction to be a bit more magnified, especially if a homeowner can get a home for no or little money down.
I wonder if you are right here. On the other hand, these people could get lucky and experience a nice rebound in values and make money for doing nothing, thus starting the cycle all over again. If they can hold out for two years, you might be right, but they will still be better off, no? Putting aside where the $8,000 is coming from of course.
September 26, 2009 — 1:14 pm
Doug Quance says:
Twenty-something years ago… back when the government thought we didn’t need oil refineries anymore (something I helped design) I went to work for a furniture store. Hey – a guy has to eat…
One of the promotions they used to run was to give away free hot dogs and Borden’s ice cream. Sometimes, we’d see cars show up loaded to the ceiling with kids to come and eat the free hot dogs and ice cream. These people never bought anything… but they would burn as much gas as necessary to get there early and often.
This also reminds me of the time a friend was trying to get rid of some young kittens from a litter that his cat had bestowed upon him. I told him to put a sign out in front of his house that reads “Free Kittens For Sale”. Everyone who stopped wanted one of those “free” kittens.
We, as humans, change very little over time.
September 26, 2009 — 1:29 pm
Greg Dallaire says:
Greg,
We share very similiar view points on whats going on in politics and the world.
In my local market i’m seeing people coming out of the wood work to also buy properties that I would not suggest to even the most novice of investors.
A free market is not free when you are constantly trying to control it. We sadly are going a different direction and could have some huge effects down the road.
I love the email I got from my broker directly from NAR to flood the gates of local represenatatives about extending the tax credit.
If it wasn’t for all this free money clouding of judgement people might think of us as used care salesman.
Thankfully guys like you and me actually consult and educate people and not just sell them something for the wrong reasons.
September 26, 2009 — 9:05 pm
Mark Green says:
Greg – great analogy. We’re such an impatient society. We want free markets yet we refuse to let the free market run its course. I bought a house in SoFla in the mid 90’s for $125K. Moved to CA and sold it 5 years later for $145K. That same house without improvements went for over $400K during the boom.
We’ve simply seen the market returning to normalcy. Why can’t we just take our medicine and learn from our mistakes?
September 27, 2009 — 6:29 am
Brian Brady says:
“Why can’t we just take our medicine and learn from our mistakes?”
Great question, Mark. The boom and subsequent bust was because of gov’t economic planning. Joe Strummer nailed it last week when he said mortgages were the “newest” way to buy votes.
Now we all see that gov’t planned markets don’t work and cause wild volatility. The answer is to NOT take the medicine being offered by the government, never take it again, and adopt a more “holistic” approach to free markets.
September 27, 2009 — 4:10 pm
Mark Green says:
Brian, I just can’t even watch the freaking news anymore. Clearly we are a society motivated by fear, and the media taps into that weakness for the sake of ratings. It’s sad.
Today, for instance, I’m on the treadmill. The top story is missle testing in Iran. They show Iranians in the street with signs that say “Down with Israel”.
I have 40, maybe 50 years left on this earth, if I’m really lucky. Ignorance is sounding better and better to me. Unfortunately though, I have a daughter I love that will have to deal with a negative repurcussions of the decisions we’re putting off today. Later man.
Maybe you’re best off just following your Phillies and Chargers. I’m gonna try honing on my Gators and Falcons. That’s the plan for me dude.
September 28, 2009 — 8:20 am
Al Lorenz says:
From the headline, I thought this was going to be a marketing tip! But, the ice cream analogy for the home credit is even better.
I’ve been bothered by both the tax credit and the lobbying to extend/enlarge it. I don’t really have first time buyer customers, so while it hasn’t been in my face every day it irritates me to be a Realtor when I believe the NAR is behaving so poorly.
Thanks Greg.
September 28, 2009 — 9:52 am
Jim says:
There is a line that directly connects the ice cream analogy and reality here. people are always wanting for more. you give them your hand to eat but they would want to eat your whole arm instead!
September 30, 2009 — 9:09 pm