Volume 48, Issue 3 - May 2009
A dealer’s perspective
by R. Mark Reasbeck, owner of Coyote Springs Window and Door of Las Vegas. Mr. Reasbeck’s comments are solely his own and do not necessarily reflect those of this magazine.
First National Loan Shark Bank
Part I: Some Reflections on Loaning Money to Builders and More
Editor’s Note: This is the first part of a two-part series. Be sure to watch for the continuation in the June/July 2009 issue.
This is my 50th and last year in Las Vegas. My gut and common-sense approach to life tells me that the new housing market will not emerge again until mid-2011. I have a trifecta of reasons.
The first wave of house repossessions was the flippers. These were the people camping outside a model complex in their rent-a-cars to put $500 down on a house and try to make a cool $100,000-plus at the time of closing. The second group of repos were/are the “ARM ‘n Leggers,” who rationalized in their minds, with the help of greedy lenders, that making $60,000 a year could, indeed, allow you to buy a half-of-a-million-dollar house WITH NO MONEY DOWN. The next silent group losing their homes is the one paying the consequences of groups one and two, and are people who have lost their jobs—with no chance of finding replacement employment.
Las Vegas and Phoenix have learned that the farther up a rocket ship launches, the fall is equidistant. From the top 20 zip codes with the highest proportion of repossessions, Las Vegas owns five of them. Add to this equation, the “Wall Street Builders” who bought and developed land at peak pricing. It is easy to see that Las Vegas will be at least a year behind other areas that kick start the new housing markets. The glut of homes will take years to balance.
Bank, Borrow or Steal
I believe we may have set a Guinness Book of World Records with the incompetence level of leadership in the Congress of the United States. (I’m also sure I won’t get a lot of opposition on that view). The bail-out of last October didn’t work, so let’s try it again, said the 2009 Congress. Please feel free to forward the following to your Congressperson.
I have been in and around construction all of my life. Many times during my window career, I would be asked to bid windows for budget purposes. Why? Because the bank would require an itemized list of every component, labor cost, equipment rental and even a percentage for damage and theft. Joe-the-builder could never approach a bank and say, “Give me $200,000, so I can build a house.” The bank would be the final word in deciding that you or Joe could, indeed, build a house with the requested monies. During the construction, the bank would release funds in the form of a voucher or progress payment, based on completed and inspected work, “vouching” that the category was within the budget submitted.
Bad Behavior Rewarded Here
So now the banks have approached the government asking for Wall Street Welfare, forgetting to submit to Congress an itemized list that they had always required of others that shows where the monies would be spent. Forgetting that banks would never lend Joe-the-Builder $200,000 at random, the banks asked for help, so they could free-up credit. Congress, forgetting they have no clue of how business works, GAVE IT TO THEM. Instead of lending money, the banks forgot their original request and went and cannibalized other banks and can’t remember what they did with at least $70,000,000,000. See, it’s all just a misunderstanding.
Forget the above. So the average Congressperson can understand, this is like Joe-the-Builder taking the $200,000 he was given to build a house, forgetting to be accountable, bought out a small competitor, acquired a new truck, flat screen, wave runner and ran short of funds to build the house, forgetting that this was his reason for borrowing the money initially. What do you think the odds are that the bank would reissue the funds to Joe-the-Builder AGAIN, to build the house?
Fah-git-about-it. But that is exactly what Congress is doing with Bail-Out II. Their new mantra should be “Bad Behavior Rewarded Here.”
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