A Hard Rain's Gonna Fall: Guest MINDSETTER™ Hellman
Joel Hellmann, Guest MINDSETTER™
A Hard Rain's Gonna Fall: Guest MINDSETTER™ Hellman
I know of the historical interest rates, but those cannot be maintained in the light of inflationary pressures. I know there are billions going to help distressed people. It will not be enough. When you fall behind in both rentals and foreclosures, the fees in all such contracts are a ruinous insult to injury that in the best of times make it incredibly hard to dig out.
And these are not the best of times for many people in this state.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe real cause of this artificially hot market is the low inventory of properties. All the other factors are secondary, and if the moratoriums are lifted today, or on July 1 or in a year, that day of reckoning when huge amounts of property for sale and rent will be dropped on the market.
You will read that the high prices and hot market will last for a couple more years. I have heard that refrain before: In May of 2008.
You remember 2008. That was the beginning of the real estate crash caused by easy credit and bad banking procedures. As a result, a lot of foreclosed properties came on the market. The stock market crash, which we are at risk of now, exacerbated the situation. I remember 2009. I found myself in the Rhode Island epicenter of the crisis.
Barrington had the misfortune of doing its required mass appraisal of real property with a snapshot date of December 31, 2008. The revaluation was issued in May of 2009. There were issues. The fact that they switched appraisers to Vision appraisal, and for the first time despite a stated "gentleman's agreement" ( a quote from a former town council president who lived on the water) to give breaks for wealthy homeowners near the water to reduce their taxes. And any taxes the wealthy did not pay are paid by everyone else.
So when all the foreclosed properties hit the market and the fact that the wealthy were assessed at full value for the first time. and the big fact that most properties in the period of when the comps were taken were from mostly spring 2008 and the market was down about 40% by May 2009. Many people saw their assessed values and taxes double while their values dropped.
The wealthy in Barrington staged a revolution. They sued the town and organized a group, the Barrington Tea Party. The Town trying to calm down the justifiable anger put a committee together of 2 Members of the tea party, a Democrat town committee member, a Republican committee member and me. I was the foolish person who stood between the angry mob and the town council.
We did not throw out the appraisal like the Tea Party demanded, but hired a new company with an outside advisor and went through everything with a fine-tooth comb. It was mathematically the hardest committee I ever served on. We went through everything. Vision had made a few mistakes, inevitable in a mass appraisal and why they have appealed.
But mostly the wealthy just didn't want their taxes raised. One realtor with a home on Rumstick Point complained her house had gone from 2.5 Million to $3.5 Million. I asked her if that was the right price? she said yes, but let me sell it first. That would add about $2000 a month to the prospective buyer. There was one person who said he should not be used as a comp because he had overpaid for his house and it was costing his neighbors' money.
But the reason for the drop was the increase in inventory. Houses were for sale on almost every block, and dropping and not selling. The house I lived in went from $540,000 in 2008 to $375,000 in 2010. And when the moratorium gets lifted, 90 days later the market will be flooded and prices will drop as supply outstrips demand. And while there are many variables, Interest rates, how much aid to whom? Will Banks work with landlords who are stuck with non-paying tenants, but I expect that the ensuing crash will be much worse than 2009.
So I would give a warning to all those paying over ask on property: what goes up does and will come down!
Me? I just royally screwed. I had a tough year financially in 2020 like many. But unlike those 1 in 7 renters. who are stiffing their landlords, some of whom are pocketing money, and not paying their rent, I took the stimulus money and that of my adult children living with me and paid my rent, every month. I sent it a day early each month. If I were smart I also would be playing the system, I could have not paid my landlord. But this is his only rental property, and he needed to pay the bills. As a businessman, I understood that and I did not want to cause him grief.
But because I paid my rent, as I should, I am now being evicted! If I had not paid my rent, like so many others, I could stay longer. Now he sees high sales prices and figures the house will be easier to sell empty. He is right. I can't buy it because my credit is recovering from a difficult divorce that left my credit a mess. But because of the moratorium, no one has been evicted for 15 months. I am looking for a modest 3 bed 2 bath house to rent In EP so my son can keep his job. There are none for rent. None. There was one last month. 1.5 baths only and $1000 more than I am paying. I didn't get it. By September 1 when the foreclosures work their way through the system there will be plenty of properties available, and cheaper. But too late for me.
There is something fundamentally wrong, wrong with a system that rewards the people who do not pay and punishes those who do. But if you are one of those people who read the optimistic articles on real property and think the prices will keep going up then contact me. I have a great bridge I can sell you. It is just over in Brooklyn. Easy payments.
Joel Hellmann was a member of the Barrington Ad Hoc committee 2009-20012 and also a member of the Barrington committee on appropriations and the charter review committee