A real estate market even Midas can love

By: PHIL STRICKLAND - For The Californian | Friday, August 17, 2007 11:32 PM PDT ∞

Ed was one of those guys, it truly can be said, who was larger than life.

Years ago, when a family member was about to buy a house in suburban Washington, D.C., he remarked that it ought to paid off in five years.

You'd be tempted to scoff at such a statement, except that Ed had managed at that time in his life to succeed in real estate to the point that many millionaires only dream about.

And he did it while raising and putting eight children through college.

In the early years of his real estate development career, he slept in his truck at job sites to save the cost of a night watchman. In later years he once built, on a bet, a home with no back door ñ--- he put it on the side ---- in a very pricey Maryland suburb. It sold.

When he bought his wife an expensive foreign-made roadster for Christmas, he was asked how much the payments are on such a car.

"I don't know, Hoss, I just knew I couldn't afford them," he said deadpan.

Some said Ed had the Midas touch, his widow Adelaide said recently, but you'd be wrong to assume that luck was the mother of his success.

Ed owned homes on the coast in Delaware and Florida, each complete with a deep-sea fishing boat. He bought extra slips at one pricey oceanfront development where he wintered so that when friends came to visit they'd have a place to park. Among his holdings in suburban Washington, D.C., were condos, scores of townhouses, medical buildings, high rises, and sundry real estate-based investments there and elsewhere.

If Midas were spending time with Ed, it was because he liked being around people who by dint of hard work and careful money management made their own luck.

Sure, Ed incurred debt. But for him it was a tool. A tool to be used carefully and put up when it no longer was needed. "Free and clear" were words he liked associated with the property he owned.

Free and clear. Sadly, those are not words a lot of our neighbors hear very often. In fact, it's quite the opposite, as reports continue to show.

Watching the "experts" on television and reading reports on the local real estate market easily can interfere with one's digestion. Unless, that is, you listen and read closely.

Once you get past the depressing statistics, the talking heads pretty much seem to be saying that the housing "crisis" is no crisis at all.

Tough times? Yeah. Send us into a depression? Nah.

Mostly it is an overdue housecleaning. Of the number of mortgages in default, one financial "seer" observed that if you look at it from the other end, you see that 98 percent of them are being paid.

That doesn't help the 2 percent who got in over their heads with loans everyone should have known couldn't be paid, but, brutal as it is, the market is taking care of that.

Locally, we see foreclosures climbing yet again, no doubt with some aid from properties now moving through the process that appear to have been part of a fraudulent real-estate investment scheme.

Sure, those foreclosures hurt too, but their impact results from what appears to have been a scam, not some inherent weakness in the local market.

It also has been said that the relative stability of prices in the more expensive part of the market is hiding the true depth of the problem.

Certainly, statistics can be skewed, but the fact remains that, for the most part, the problem is with loans that probably should not have been made on the one hand and those justifiable on paper, but frivolous, on the other.

That lending practices are being tightened is a good thing. After all, nothing is accomplished, except keeping lawyers well fed, by giving a home loan to someone who mostly likely won't be able to handle it.

Further, we see reports that the housing market is affecting the retail market in local cities. Certainly to a degree, and obviously in the home-improvement and furnishings sectors, but let's not forget that spending shifts as new stores open and, besides, consumer spending is fickle.

It appears that among the non-housing-related retailers, tighter equity lending has had the most impact on auto dealers, taking with it sales tax dollars on which the cities depend.

But, even with the housing market weighing heavy on the local economy, spending increased in much of Southwest County.

Population increased too. And houses continued to be built and sold.

And the sun set behind the Santa Rosas just yesterday.

There clearly are some rough spots, and even Ed knew that sometimes you had to cut your losses and consider the experience a lesson learned, but the undeniable reality is that property values increase.

Maybe not as fast as you'd like. Maybe not when you'd like. But they increase.

Underlying our problems now is the careless use and issuing of credit.

Ed would advise us to learn to say: "I can't afford the payments."

Phil Strickland is a Temecula resident and regular columnist for The Californian. E-mail: philipestrickland@yahoo.com.