[arin-ppml] Will the price per IP really be affected by thetransfer market introduced in 2009-1?

[Ted Mittelstaedt]

> -----Original Message-----
> From: Stephen Sprunk [mailto:stephen at sprunk.org] 
> Sent: Friday, May 15, 2009 9:02 AM
> To: Ted Mittelstaedt
> Cc: 'Joe Maimon'; 'ARIN PPML'
> Subject: Re: [arin-ppml] Will the price per IP really be 
> affected by thetransfer market introduced in 2009-1?
> 
> Ted Mittelstaedt wrote:
> > I don't say though that I believe the idea that the more you 
> > interefere the worse the comeuppance is at correction time.  The US 
> > financial sector is a prime example of an industry with very little 
> > interference and terrible comeuppances at correction time, just ask 
> > Benie Madoff
> >   
> 
> The real estate market arguably has the most government 
> interference of any market in the US, and that is the root 
> cause of our current financial problems.  The FHA, FNMA, 
> FDMC, and VA were originally chartered to "stabilize" the 
> market, and they did an excellent job at that "interference" 
> with the market's previously wild swings.  However, in the 
> 90s, they were rechartered to get _everyone_ a house, and 
> banks were forced by law to give mortgages to people who 
> couldn't afford them.  

I've heard that fairy tale before.  The problem is that people
who have actually looked at this theory have disproven it by
comparing the foreclosure rates on CRA (Community Revitalization
Act) loans against the standard loans, they are an order of
magnitude lower.  Plus the CRA (ie: "forced loan") stuff
initally sold for a lot less and resale under foreclosure is
a lot quicker and much less of a loss for the bank.  And
this is as you would expect because poor people with bad
credit who got an opportuity to get a loan typically bought
a much cheaper house.

The real culprits were the army of home flippers out there who
were (and are) typically mid to upper middle class people buying
second homes for $300K and putting 100K into them and expecting
to get $600K a year later.  When the market tanked they all walked
away from their loans (or short-sold them) and the banks had to
eat it, initiating the subsequent bailout.

This is why the current government programs to help out foreclosures
aren't working - because all of them prohibit assistance if the
foreclosed property is a second home bought for speculation, and
it is precisely those homes that are driving the foreclosure rates.

The home flippers were mostly using ARMS (why would you pay principle
on a home your expecting to sell in a year) and it is the bundling
of those ARMS and subsequent resale as unregulated securities that
caused a bubble in the stock and bond market, when that bubble
burst the stock speculators paniced and shoved money into commodities
speculation, which pushed gasoline to $4 a gallon last year,
contracted consumer spending, and that contraction caused a shortage
of buyers for flip homes which triggered the collapse of the housing prices.

> The result was widespread marketing of 
> ARMs and "subprime" loans, and that huge increase in 
> artificial demand directly created the real estate bubble.  

The artificial demand was from home-flippers buying more
properties to flip, and using ARMS to do it.

> When all those ARMs reset at higher rates (due to the 
> bubble), we saw record levels of foreclosures and prices 
> dropped back towards where they would have been all along if 
> it weren't for the government's interference.
> 

Most ARMS reset at the 3 year mark and the collapse was underway
long before.  Before the crash back in 2005/2006 it was very common
for home flippers to complete a sale BEFORE their ARM reset.

The resetting of the ARM rates was just a byproduct
of the crash, and it happened because nobody was buying for so
long that the home flippers were sitting on property.  It was the
trading of unregulated securities that were FUNDING the arms that
started it.

Google up "Enron loophole" for a better understanding of the
problem.  What your doing is simply repeating a line the US
Republican Party has dreamed up in their constant war against
governmental regulation, a line that is absent many critical
things.

> The financial sector simply took advantage of the 
> government's interference,

No, the financial sector in conjunction with the land speculators
took advantage of the UNREGULATED market.

This is why last year the feds forced all of the trading houses
to either collapse or recharter as banks - because that was the
quickest way to bring them under regulation.

Ted