San Diego County Assessor Promotes Buying Real Estate

[powayseller]

Another great article from Kelly Bennett at the VoiceofSanDiego. Please please send in a donation to them if you like their stories; this independent media group does not accept advertisers. BTW, I miss reading Rich’s Thursday columns. Rich, are you coming back?…

Mr. Smith Goes to Market

“He raises his voice, gestures energetically and fires out statistics to convey his message: Now’s the time to buy a home in San Diego.

“It’s a buyer’s market,” says Greg Smith, “period.”

Greg Smith, county assessor/recorder/clerk, is delivering a clear message: Now is the time to buy a home in San Diego.

Smith also has a stake in how the real estate market fares. As county assessor, Smith monitors the intake of property taxes, which constitute the largest share of revenue for the county. More than one-third of the contributors to his most recent reelection campaign had ties to the real estate industry. And, closest to home, Smith’s wife, Arlette, is a Realtor with Prudential California and has been a licensed real estate broker in California for more than 30 years….” – Voice

First of all, I don’t think a public official should *not* be advising people on investments. Second, the market is clearly falling, and advising people to buy now is fiduciary irresponsibility. If the market keeps falling, and someone loses money on a home because they followed his advice, could he be sued? I sure hope so!

He sold out for money, and there is no worse scum in my book than selling yourself out to money, and profiting at the expense of the less fortunate and less educated.

Mr. Smith, you are supposed to assess our taxes, not encourage us to buy overpriced homes in a falling market. Ever heard of “asset bubbles” and “reversion to the mean”? Were you advising people to buy just after the prices started dropping in the last housing bust, or were you not yet a beneficiary of real estate donors?

Shame on you Mr. Smith, for betraying our public trust in your office!

Schahrzad Berkland
Poway, CA

[Anonymous]

Yep, Smith has got questionable judgement: (1) booster for buying when prices are just starting to move down and (2) letting his daughter move to a kibbutz to engage in communal living in Israel (see yesterday’s Union-Buffoon).

I’m a big fan of Israel (and am an active churchgoer), but living in common isn’t a good way way to start off your life, unless you’re in a religious order or the military.

I’m looking forward to the big downturn in property and income tax revenues; our local, state, and federal governments spend money on stupid things, and we need a big contraction to get them to return their focus to the essentials.

[speedingpullet]

I worked on a kibbutz for a year in my late teens and found it an incredibly good life lesson. For many its the first time they’ve ever been away from home and living on thier own. Not only do you need to keep your place clean you have work 8 hours a day, or they’ll kick you out!
It teaches lessons about how a community is greater than the sum of its parts, and helps to foster the understanding that, as part of a community, you are responsible for your share of making it work.

Personally, I can’t think of a better thing that youngsters today could learn. She may not like the lifestyle – its pretty basic, especially for American kids used to hot-and-cold running everything – but at least she’s experienced it, which is more than many other kids today will.

Lots of people live in a ‘communal’ way – not just religious orders or the military. Even renting in an apartment complex is a sort of ‘communal’ living style. If you’re totally unconcerned about the other people around you then eventually you’ll get kicked out.

I don’t really understand why being taught to consider others needs and to work for a common good ‘isn’t a good way to start off life’.

[speaker]

This guy is an absolute disgrace. If he wishes to opine about the real estate market then do so in private among friends.

his wife is a real estate agent….he is the county assessor….he takes contributions from the real estate industry….the list goes on.

can there be any more clear case of conflict of interest than this!?

“End of line.”

[barnaby33]

Sure there can. When the next article reports on his acceptance of PAID speaking engagements, thats worse.

Josh

[Anonymous]

Speedingpullet, I’m glad that kibbutz life treated you well. I’ve read of kibbutz’ having common rearing of children, sort-of-open marriages, etc., just as happend in America’s utopian colonies (New Harmony, Oneida, etc.). Those sort of lessons aren’t good ones to learn, and none of those societies survived. If the kibbutz you (and Mr. Smith’s daughter) lived on didn’t practice those silly ideas, excellent.

[pencilneck]

Wasn’t it just 2004 or so that Alan Greenspan was urging Americans to use variable rate mortgages? This seems minor in comparison…

[Daniel]

No, he did not. He stated a fact (which IS actually a fact): if people used ARMs rather than fixed loans in the past, they would have saved money. His statement has been widely misinterpreted in the media, though, as saying that people “should” use ARMs from now on.

And to keep things in perspective: believe it or not, it is actually true that ARMs are generally cheaper than fixed-rate loans over the long run. On a fixed-rate loan, the lender assumes interest-rate risk, so it compensates for that by higher rates. If the borrower is willing to shoulder that risk, he/she gets lower rates in return. It’s the exact same thing with Treasury yields: long-term paper (30-year bond) almost always yields more than short-term paper (6-month bill). Think of the 30-year bond as a 30-year “fixed mortgage”, and the 6-month bill as a “6-month ARM”. The yield curve is sometimes flat or inverted, but most of the time the 30-year yields more than the 6-month.

And before you power up your flamethrowers, no, I’m not talking about the 1% teaser ARMs, the ARM as an “affordability vehicle”, and all the other junk out there.

[capeman]

Anybody want to offer up a wager with this guy? Maybe everyone pitch in for a pot that he gets if prices drop less than 20% in the next two years vs. he loses and leaves his post. It’s a sure win for us and sadly a loss for everyone who signs up for a house and loses the traditional 20% equity put or is underwater 20% by following his base-less optimism.

[pencilneck]

Daniel,

You’re right on about that quote. I thought he had advocated ARMS, but in re-reading the speech while he does not uniquivically advocate variable rate mortgages, Greesnpan does seem to imply that these are the best option for consumers

For example:

“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”

But you’re absolutely right that the media made a frenzy over the implication of his statements rather than paying much heed to the message itself.

[PerryChase]

Daniel, you’re right. ARM was certainly less expensive than fixed in the last 20 years mostly because rates have been coming down. A buyer would have saved without having the expense of refinancing several times.

However, I beleive that a buyer who got a 30 year fixed at 5% would benefit in the future as rates trend upwards.

[speedingpullet]

Off topic

Re:Kibbutzim.

I think someone is pulling your leg.

Kibbutzim are mainly agricultural/light industrial communities. Yes, they are more ‘socialist’ than most Americans can stomach, but a lot of other countries around the world don’t have such a negative view of small-scale socialism (as opposed to Totalitarian States) as the US does.
They work well, because they are small and if you really don’t take to the life (many don’t) you aren’t forced to stay.

Amazingly, much of the fruit and vegetables sold in Europe – especially in winter – come straight from kibbutzim, and thier more capitalistic sisters, moshavim.

Most people live on a kibbutz because they like the lifestyle – work hours normally don’t stretch much beyond 8 hours a day, and if you’re a member (rather than a volunteer like I was) you normally find a job that you enjoy and stay at for years.

In return – housing, food clothing, job security, a sense of community.
Its not the life for everyone – many youngsters leave to go and work/live in cities – but a surprising number of them return once they have families and want a quieter life.

If you define your life by how much money you have, or how big your ‘toys’ are, then kibbutz living would be anathema. Still, more ‘other directed’ people like the emphasis on commonality and working for the greater good of all.

As for ‘open’ marriages…I couldn’t tell you, though my gut feeling is that its no more common than it is anywere else.

Common rearing of children? Yes, kids are sent to school (on the kibbutz, taught by teachers who are kibbutz members) and when they get older (teenage) they will go and live in single-sex dormitores.
But, as they all live in the same place, the whole family will sit down together for meals in the Dining Hall, or around the parents table. Most of them get to see more of thier parents than many American kids with two working parents do. Plus, any kind of emergency, one or both parents can be with thier kids within minutes.

Its been a long time since I was on a kibbutz, so I don’t even know if the older kids still live away from the parents anymore.
When I was there, most of the kids really liked having the experience of living away from home (what teenager wouldn’t?), and were comforted by the fact that their parents were never more than 1/2 mile away.
Add into that the rural setting, the sense of knowing each and every person on the kibbutz, a sense of value and personal repsonsibilty towards yourself and others, and you have a pretty good place to grow up.

Having said that, I think anybody sending their kids over to Israel at the moment is insane. My old Kibbutz is 1.5 miles south of the Lebanese border, was busy evacuating everybody they could to all points south, last I heard.

[powayseller]

Very interesting info on kibbutz.

Daniel, thanks for clearing up Greenspan’s comments. But you really have to parse his words to get at what he meant. If his intention was to give more options, why didn’t he modify or explain it better, when he realized the media misquoted him and lenders were giving ARMs to subprime borrowers who had no ability to “manage their own interest rate risk”. Most of the people who took those loans couldn’t even tell you what that means. All they knew is what they read, and presumably what their lender told them: the government advocated ARMs. Greenspan had a duty to set the record straight, and conveniently, he did not.

[equalizer]

Daniel & co

Disclaimer: No offense should be taken by this rant except for the Maestro.

The following is really moot because nobody really listened (I hope) to the maestro. Most people used ARMS because of affordability issues.

Feb 04 speech

http://www.federalreserve.gov/boardDocs/speeches/2004/20040223/default.htm

“American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance.

American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”

So, yes he was talking about the past ARMS better than fixed and did say that consumers would be taking the interest rate risk. HOWEVER, he clearly sent a message to banks to give more ARMs and implicitly told consumers they could save money with ARMS. You have to remember that Greenspan works to protect the banks, not the consumers!! He wanted banks to stay healthy and banks would be if they offloaded interest rate risk to the consumer. He did his job. Now, the media may have overstated his statement without including the risk portion. AGREED! However, he is/was one of the most powerful men on the planet. If he disagreed with the media interpretation, why didn’t he call a major press conference to Quell the furor?? Suzy Orman, finance columnist for Yahoo/CNBC lambasted Greenspan for suggesting ARMS with fixed rates at 40 year lows. No comment from the maestro. Only problem is that realtors and brokers may have used his “filtered” comments to pacify nervous consumers.

No conspiracy theory here. Read Jim Grants Interest Rate observer and Bank Credit Analyst, two highly respected newsletters for the straight scoop. Also check out Barry Ritholtz at http://bigpicture.typepad.com/.
BTW Greenspan made more in a single book advance than most of us will make in a lifetime. I don’t think he deserves an unpaid apologist.

“The words I use are strong, they make reality.”

[Daniel]

None taken.

[Author]

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