Bubble to Burst – Real Estate Assets or Securities?

The American dream of owning your own land goes back to the Pilgrims coming to America searching for a home to call their own.  Never mind, there were people living here already – that’s a different story. 

My great-grandparents?

My great-grandparents?

I grew up in Nebraska where the pioneer history is part of my family roots.  My father was raised on the ranch that had been “Homesteaded” by his grandmother – a single mother with six children who pioneered from Pennsylvania in the 1800’s.  Maybe it’s those roots that make it difficult for me to see real estate as anything other than a tangible asset to support American families’ quality of life, and financial security.

I’m not an expert in the history of the financial markets.  But doesn’t it appear that the mixing of real estate investing with Wall Street dynamics seems to be a unique phenomena that developed post 2001?  Is there some connection between the Dot.Com Technology stock crash, and the availability of the “creative” mortgages that fed the mortgage-backed securities, creating an economic bubble and also the current collapse? 

I find it interesting that the same press that talked about the “Housing Bubble” is now focusing on “Foreclosures” – yet there is very little coverage of the dynamic impact of the Mortgage Backed Security trading that seems to have fed both the Bubble and the Burst.
Some interesting articles and commentaries:
Wall Street Confusion

Wall Street Confusion

Wall Street investing and real estate investing are both parts of a sound financial portfolio.  It seems that we lost sight of the unique differences, and people were short-trading properties like commodities, fueling the mortgage-backed financial markets.  It’s easy to blame the individual investors, but the same companies who the Federal “bail-out” is focused on salvaging,  are the companies who promoted irresponsible lending practices.  Rather than Federal funds going to help the American families, the $700 Billion “bail out” is going to rescue financial institutions that helped create today’s problems, leaving more and more families homeless.

It’s interesting to me that whenever the economy suffers, there’s a national focus on increasing consumer confidence and consumer spending to fuel the economy.  Yet today’s solutions are all focused on saving financial insitutions that have already shown they are failures – with no direct immediate impact on the American consumer and homeowner.  So, do we believe the consumer impacts the economy?  If it’s true every other time – why is that being ignored now? 

There are better ways to spend $700 Billion to help the American economy with a positive impact on individual families.  What are your ideas?

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About Susanna "Susie" Kunkel, RA

With a belief that life is too short to not follow your dreams, Susie and her daughter became new Kauai residents in less than 4 months after visiting for the first time in 2000. She brings a wealth of information from her background in administrative, contract and paralegal work in a variety of industries including technology, investment banking, biotech and estate planning. As a Realtor, Susies's tenacious and technical approach have earned her a large group of extremely loyal clients. Susanna is a steadfast believer in "The Golden Rule", and applies it to her approach as a Realtor. "Each client and each property are unique, so it's important to me to listen intently to what my clients' goals are, and to make sure I go above and beyond to help meet them."
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6 Responses to Bubble to Burst – Real Estate Assets or Securities?

  1. bob g says:

    Susanna – 30 yrs ago my first investment advisor told me to look at housing as a place to live, not an investment. If it went up great, but don’t count on your home to help in retirement. I took that advice and never used my home to leverage other investiments. Of course he grew up in the depression when everthing tanked. I feel bad for the people who went the other way(piled on debt), but I also mad because the responsible people will end up paying off the debt !

  2. Katie Minkus says:

    Aloha, Susie. Thought-provoking article! I am especially struck by the comment, “Is there some connection between the Dot.Com Technology stock crash, and the availability of the “creative” mortgages that fed the mortgage-backed securities, creating an economic bubble and also the current collapse?” Having lived in the Silicon Valley pre-, during and post- “dot-com boom/bust” I can say that whole time was an incredibly bizarre and surreal experience for most of us who were born and raised in the area. I never thought to connect that so directly with my next bizzare experience, moving to the Big Island in 2003, right as the real estate ascent was shifting into high gear. I entered the business simply as a way to “monitor my family investments” because I quickly learned that no one pays a “real estate investment advisor” in the same way that they pay a financial advisor to watch their securities/wall street investments. Hmmmm….

    On another note, I’ve been wondering … why is the “bailout” money – $700 billion, so close to the amount of money we’ve shelled out so far funding the war in Iraq – $600 + billion? I can’t help but think that if we didn’t spend all the money (that we never had from the start) paying for a war, perhaps the “bailout” wouldn’t be such a big problem, or perhaps it wouldn’t have been necessary at all?

    I don’t know, but I can’t help but wonder …

    warmest aloha, a fellow HawaiiLife.com fan,
    katie

    Katie Minkus, R(BIC)
    katie@lavarockrealty.com
    http://www.LavaRockRealty.com
    It Takes Courage to Live on a Rock!

  3. I fear for the middle class in this one! Nice article.

  4. Allen, thanks for the comments. I checked out your website and it looks like you offer the kind of investment advice people really need. Understanding that stocks are not real estate, and visa versa. Each has their place in building wealth.
    Susie

  5. jwojdylo says:

    Another great post Susie! The sad part is that most of the middle class is going to end up paying for this bailout. I already have talked to several friends that stated they might not even pay taxes next year. I would believe we will hear this a lot more in the near term future.

    http://jwojdylo.wordpress.com

  6. Allen Taylor says:

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

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