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OpEdNews Op Eds    H4'ed 5/1/12

Real Estate 4 Ransom -- locking up the Great American Dream

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Message Karl Fitzgerald

The promise of democracy delivers little for those with empty wallets. Genuine freedom will be established when economic rights are entrenched as human rights.

Economics is the Greek term for the management of the household. To economize is to get the most for the least amount of effort. In today's world, these two terms have been turned upon each other in a battle between healthy households and savvy speculators.

Those looking to economize have taken the term literally, buying and selling real estate for an easy profit with little real effort or risk. Their main skill is engaging in a speculative study of households. Speculators understand that communities who benefit from new public infrastructure or the existence of a creative arts scene will soon draw added attention. This attention is delivered as a free lunch to landowners via rising property prices.

In the meantime, households are too busy working to notice that it now requires two income earners to meet the demands for an average mortgage in many countries. Households are led to believe There Is No Alternative.

Fannie Mae has recently taken to economize by bulk selling foreclosed homes by the thousands to large investors. Investors receive a group discount, for which they are expected to use repairing derelict properties to put on the market.

This is a contradiction in economic behavior. It is well known in the upper echelons that the land is what goes up in value, not the house. There is little motivation to renovate. These mega landlords, the over-lords of so many people's lives, will in effect drip feed the market by holding Real Estate 4 Ransom ( ) to maintain rising property prices. They know that the land will go up in value over time, so the use of houses by families matters little. The cover story has been that the majority of such sales will be sold as occupied units. What will happen with the remaining foreclosures, many of which are vacant?

It is now cheaper to buy than rent. According to Deutsche Bank ( ) , the rent-buy ratio is at a record 114%, and above 100% for the fifth consecutive month. With manufacturing wage levels decimated during this Great Recession, savings possibilities are minimal. Workers have been crunched with both lower wages and higher rents. The drip feeding of houses to the market will ensure this situation continues.

The banks have been bailed out. Now it's the property speculators turn. Chicago's Pritzker family ( ) will be rubbing their hands together. The Great American Dream is being locked up for the 1%.

Ben Bernanke is literally begging for the creation of the next bubble. Low interest rates have given cheap money to speculators to dive into the foreclosed market and snap up prime locations.

The latest US census data showed there were 24 vacant homes for every homeless person. ( ) This is a sign that home prices should fall further, especially now that the robo-signing fiasco is over and foreclosures are expected to rise again.

This is a danger to the banking industry. The solution to the housing over-supply issue has been to demolish houses, board up entire suburbs and keep them as shadow inventory. With the Real Estate 4 Ransom practice alive and well, now we are seeing policies to encourage a greater concentration of ownership amongst the 1% with these bulk sales.

Fannie Mae is effectively asking the Warren Buffett's of the world to go ethical in their selling strategies. This is clearly against economic behaviour and against their legal obligations to shareholders. Policy makers know this.

One can only deduct that the road to neo-serfdom is accelerating with each and every policy manoeuvre. A future of multi-generational mortgages where 40% of incomes to housing costs appears to be brand Obama's change you can believe in.

But if rents are on the way up, why wouldn't landlords rent out these properties?

The key issue for this Real Estate 4 Ransom atmosphere is not just the cheap money, but the cheap holding costs of owning these properties. Property taxes were once an effective tool to break up the mass monopolies of our scarce locations. This was learnt in the Gilded Age through the teachings of Classical Economics.

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Karl Fitzgerald is the Co-Director and Producer of the documentary Real Estate 4 Ransom ( )
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Real Estate 4 Ransom -- locking up the Great American Dream

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