I want to make the case that we are experiencing the largest redistribution of wealth that has ever come to pass in the United States. One contributing factor is the result of millions of foreclosures on homes formerly owned by Americans who found they owed more than the value of their home in today’s housing market. Many of those losing their homes never dreamed they would be laid off from work or working at substantially lower income after an exhaustive job search ripped through their savings. However, because of the current economic climate, many unemployed or underemployed cannot sell their homes for anything more than what they owe because of their devaluing. Becoming a landlord brings a whole new set of challenges. Letting the house go becomes the only option when mobility is necessary for employment, or if a new income level cannot meet the requirements of an existing mortgage contract.
According to Alex Veiga, Associated Press, ”While the pace of foreclosure sales slowed, lenders stepped up their home repossessions, taking back more than 1 million homes last year.”
Americans are being forced to purchase health insurance, they are required to purchase auto and home insurance to cover accidents and natural disasters, yet they do not even have an option of home insurance to provide some measure of assistance during financial hard times.
Veiga writes, “That deepened the so-called shadow inventory of foreclosed homes that have yet to hit the market. Experts contend that the housing market won't fully recover until banks find buyers for those properties. ‘We need to clear out the inventory if the market is going to come back," Rick Sharga, a senior vice president at RealtyTrac.’”
Basically, what is happening here is that foreclosed houses which hit the market for resale devalue the homes in the neighborhood, which also cannot sell at their former market value. There is no light at the end of this tunnel, so if a person cannot hold onto an investment for the long haul, not only will it not yield any profits and require being written off as a loss; the problem for those writing it off as a loss is that their credit ratings are often penalized and they are sometimes issued deficiency judgments. These are not your ordinary investment losses.
Janna Herron, Associated Press writes, “Foreclosures are expected to remain elevated through the year as homeowners contend with stubbornly high unemployment, tougher credit standards for refinancing and falling home values. Sharga said he expects prices to dip another 5 percent nationally before finally bottoming out. The decline will push more borrowers underwater on their mortgages. Already, about one in five homeowners with a mortgage owe more than their home is worth.”
Who stands to gain in all this? Certainly, those with money to purchase income property are finding that their purchasing power is taking them much further in this market.
“According to the U.S. Bureau of Economic Analysis, Americans who rented out properties in May 2011 had a gain of $3.3 billion in income. That's up sharply from April's stats, which showed a $2.9 billion rental income.”
Real estate continues to be a winning proposition for those who can rent out property and who can afford to hold onto a piece of property that cannot rent for the asking price. There is an opportunity to get in on the ground floor of an entirely new housing market based on rental properties as opposed to the value of a home growing during ownership.
As reported in Short Sale Daily News, “the rental housing market is continuing to grow in both size and demand. This is fueled, in large part, to families who went through a foreclosure or short sale and are now seeking alternate living arrangements.”
But there is a very disconcerting element in all of this which isn’t being discussed in the news. It has to do with the fact that those who cannot hold onto their homes are not only losing them, but in many cases, they are being rented to those with less economic means than those who are leaving. The American Dream is top down, bottom up, inside out.
How many people know what the phrase Section 8 housing means?
The Housing Choice Vouchers Program (often referred to as “Section 8”) is the federal government’s primary program to provide housing for Americans who are living in poverty, as well as the elderly and disabled. It provides qualifying families with assistance in paying the monthly rental fee for homes and apartments that are located anywhere, not just in subsidized housing projects. In every major market in the country it is administered locally by municipal public housing agencies, which certify the tenants and residences for participation in the program.
In essence, the people moving into the foreclosed homes are having their rent paid for by the government through the tax dollars paid by those losing the homes. Often, those losing the home are able to become gainfully employed, just unable to cover the expenses at a lower income level and unable to sell without taking the loss.
“’It’s guaranteed money,’ said David Benham, who owns several rental properties and is a founder of the Benham REO Group, which sells bank foreclosures to investors in 35 states. ‘It has a great accountability program with the renters. I love Section 8. I wish every one of my properties was Section 8.’”
Michigan Legal Aid provides an explanation for the love affair between rental property managers and the government.
“A Section 8 rental subsidy is a federal payment to a landlord on behalf of an individual tenant. With a Section 8 voucher, the government pays the difference between 30 percent of the tenant's household income and the set "fair market" rent of the unit.”
The American Dream, which is based on the idea that if you work hard, you can achieve great success, is quickly being replaced with the socialist idea, from each according to his abilities to each according to his needs. Does anyone remember voting for this? Is that what this hope and change was about?
During an interview on Chicago Public Radio WBEZ 95 FM, future President Obama discusses the best way to bring about a redistribution of wealth.
One of the I think tragedies of the civil rights movement was because the civil rights movement became so court focused, I think that there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributed change and in some ways we still suffer from that…This country is not always been willing to make the sacrifices necessary to bring about a new day and a new age I think when you spread the wealth around its good for everybody…My argument would be we also have to make sure people are trained for jobs they have child care they have affordable housing in areas where jobs are being created, entrepreneurs in minority communities are getting financing to create their own businesses and create jobs in those communities and all of those involve not only individual society but also societal responsibility.
Thomas Sowell explains the reality of income distribution in his book, Basic Economics: A Common Sense Guide to the Economy.
“Although people in the top income brackets and the bottom income brackets – “the rich” and “the poor,” as they are often called – may be discussed as if they were different classes of people, often they are in fact the very same people at different stages of their lives. Three-quarters of those Americans who were in the bottom 20 percent income in 1975 were also in the top 40 percent at some point over the next 16 years…because of the movement of people from one income bracket to another over the years, the degree of income inequality over a lifetime is not the same as the degree of income inequality in a given year.”
There is no factual basis for President Obama’s assertion that a redistribution of wealth needs to take place in order for those in the bottom income bracket to move into a higher bracket, yet the country has embarked on a plan to redistribute the wealth.
As the song written by David Bowie, goes: This is not America. Shala la la la.
The people in this country are no longer sovereign. Our rights have been yielded to a government that believes it knows what is best for the people. And this means providing the means for one economic class to afford what another cannot yet will ultimately end up financially supporting.
A little piece of you. The little peace in me will die. For this is not America...