Matthew Ferrara, Philosopher
 

Do We Need A Housing Czar?

Well, Bailout Nation (as CNBC’s Larry Kudlow calls it) is at it again – this time trying to jam a $34 billion dollar “loan” with “conditions” through Congress but with a twist. Rather than just giving the money to the Little Three American Auto Companies (who, by the way, we could purchase for less than 15 billlion) and especially because we don’t want their greedy, evil CEO’s giving themselves bonuses with it, we’ll appoint a Car Czar to oversee the money and their plans to “become viable.”

Interesting plan. Considering the industry is also looking for a bail out, should we consider asking for a Housing Czar?

This is so wrong – on so many levels – that it makes me wonder if I’m the only one who notices that our politicians regularly use the language of former Russian dictatorships and metaphors of Medieval Inquisitions to describe bright ideas from our government?

But, hey, as a philosopher, it got me thinking… Since the UAW and the NAR seem to have the same policymakers, both seeking bailouts for decades of failures to innovate their industries, maybe we could find some super-expert to act as Housing Czar to help us out? As previously argued in this column, The National Association of REALTOR’s “Rescue Plan” isn’t much better than the auto-industry handout. Both bail-outs are really “stealth payments” to failed business models: Detroit’s money will end up as a political payment to the UAW. NAR’s requested $7500 tax credits for buyers really just subsidizes real estate salespeople whose production is similarly UAW-sub-standard. The evidence in both cases that the bailouts are payoffs is that, in both industries, there are plenty of healthy, propsering firms who aren’t asking for any taxpayer money to sell their cars or pay their workers.

Still, the government seems willing to handout money, as long as one of its cronies goes along to supervise. So, does that suggest that REALTORS – as an industry – needs a Housing Czar to get it back into shape?

The Car Czar is supposed to supervise the auto industry’s transformation from financial and operating disaster into sunshine and bubbles – all Green, too, let’s not forget, even though consumers prefer SUVs. Perhaps a similar mission for a Housing Czar would be to help the real estate industry create business plans that were “viable” and implement “changes” to benefit consumers. The Czar could mandate green housing, force builders to lower costs and offer money from the Molotov Mac Mortgage Company. The Czar would “force” the industry to confront its challenges – in a non-political way, of course – and deal with its “legacy” costs like the high cost of labor.

And let’s face it: Just like the UAW’s cost-distortions of manufacturing labor costs, various forces within the real estate industry have done an equally good job at distorting the labor-cost of agents, too. The opening argument must come from the virtually non-existent standards for joining the Union. Combine a pulse, $100 and a passing-grade on a 40-class-hour state-mandated exam and – presto! – you have someone sanctioned by law to act at a fiduciary level on the¬† consumer’s largest financial transaction of their life. The only better job in town is at the UAW, where lobbyists recently forced automakers to permit UAW workers to smoke while on the assembly line – with the hopes of being laid off due to some factory automation thus spending their remaining productive years playing parchesi in the rec-rooms of the Jobs Bank building. A Housing Czar could address these issues, perhaps by at least requiring pre-licensing to be as substantive as, say, a hairdresser license in Massachusetts which requires 1600 hours of study and examination. And maybe outsourcing the Jobs Bank facility to Chuck E. Cheeses?

The Housing Czar could also tackle distorted operating costs of brokerage, too. Let’s face it – everyone thinks agents are “free.” Rightfully so, perhaps, since there are so many of them that their overall productive value to the industry falls to zero. Consumers know they can pick up the phone and get a line of REALTORS at their home within hours – at no cost. So agents are essentially loss-leaders to the business. And let’s not forget that it took 1.2 Million REALTORS to sell 5.5 million transactions last year. Compare that to Toyota, who made more than a million cars in America with less than 36,600 people. Which sounds more efficient to you?

Beyond , the Czar could tackle brokerage operations, where labor costs distort consumer pricing, too. still think recruiting is a “free” growth plan. Adding warm bodies to cold office desks continues to be the standard “viable” strategy¬† despite decades of evidence that it only grows costs, not revenues. So much for the “free costs” of “independent contractors.” The Czar should look into why that’s not the case. He’d be surprised to learn that 75% of all REALTORS earn less than $46,000 annually. If he studied basic accounting, he will notice that the average agent-contribution to a brokerage is a net-negative. So the broker will have to pass that loss along to the consumer, in the form of distroted commission costs. Sounds kinda like GM’s plan to sell Chevy Volts at a $10,000 loss but gain “customers” at the same time. Two industries with sales that cost them more than if they didn’t try, should suggest a lot of questions the Housing Czar might ask.

Of course, any politician will tell you – and their Czars – that the real troubles in both industries aren’t the labor productivity or the products. All houses “should sell at full price” just like “any car should be just as good and desirable as another.” So the Czar should focus on the real culprits: Greedy Executives! Those wax-mustachioed brokers are making too much money – setting commissions so high they must be profiteering off the backs of underpaid agents and unsuspecting consumers! Somebody must be pocketing a lot of money – and only an independent, taxpayer-reporting Czar can do the kind of audit that gets to the bottom of the scandal. Some of us might already imagine some of his recommendations – windfall profits taxes on luxury sales, caps on commissions, “affordable commission” regulations – because the little guy consumer shouldn’t have to bail out a business that isn’t (politically) viable.

Well, it’s an interesting concept, don’t you think? It should certainly make all REALTORS think about what they might get – along with their “rescue plan” – when they ask for taxpayer money to revive their industry. REALTORS asking for cheaper mortgage rates are pining for the days of Fannie Mae funny-money funds that fueled the housing bubble. Do we really want to return to those days? Perhaps. But while the majority of Americans tell pollsters they are already sick of bailing everyone out, REALTORS should look in the mirror. I’d bet a fair number of REALTORS are amongst those calling their Congressmen demanding a “Czar” be sent along with their money to oversee the automakers use of the funds.

Are we ready to take taxpayer dollars, but bend our knees to a political Czar?

  • Matt, Great job on your exposes. Great stuff. Many of them I think you’re reading my mind. Keep up the good work.

    John Callahan
    LowellLofts.com
    jc@LowellLofts.com

  • Matt, Great job on your exposes. Great stuff. Many of them I think you’re reading my mind. Keep up the good work.

    John Callahan
    LowellLofts.com
    jc@LowellLofts.com

  • Matt, Great job on your exposes. Great stuff. Many of them I think you’re reading my mind. Keep up the good work.

    John Callahan
    LowellLofts.com
    jc@LowellLofts.com

  • Matthew Ferrara

    Thanks, John!

    Best wishes for a Happy Holidays and a successful 2009.

    Matthew

  • Matthew Ferrara

    Thanks, John!

    Best wishes for a Happy Holidays and a successful 2009.

    Matthew

  • Matthew Ferrara

    Thanks, John!

    Best wishes for a Happy Holidays and a successful 2009.

    Matthew