The American Dream
THE AMERICAN DREAM
Home values nationwide have been in decline for nearly four years to such an extent that some people think homeownership as an investment is a thing of the past. I couldn’t disagree more. While a confluence of events in the last few years has affected homeownership, I believe returning to a strong free-market system will restore people’s confidence about owning a home.
Real estate with a free market is one of the best hedges against inflation. Additionally, homeownership instills prides and provides many opportunities to make joyful memories with family and friends. Since 1945, home values have increased by nearly one percent over the inflation rate. This simply means your home value remains constant, or slightly better, with the buying power of the dollar.
The recent decline in values is a meltdown of runaway price increases created from government intervention over the past few decades. Policies were launched to encourage mortgage lending with lower standards and payback schedules. People who couldn’t afford to be homeowners previously were suddenly able to buy houses. This invited opportunistic investors to take advantage of a weakened position.
The result was a large number of subprime loans intermingled throughout the financial markets; when the economy softened there were fewer buyers and prices began to fall. The house of cards crumbled. In a free market, without government interference, the loans would not have been made and normal economic cycles would have prevailed. Even to this day, and to no avail, the government continues its attempt to manipulate the market.
The only fix is to return to a free-market policy. This means the government must get out of the way. Regardless of your political party preference, one must accept that neither party has done a very good job allowing capitalism to work freely.
In 1930 our country turned away from Adam Smith’s philosophy of free enterprise and embraced the Keynesian theory of bigger government. Since then, those in Washington have been making decisions of who wins and who loses. Whether it’s for a corporation or a special interest group, the government has been taking away from someone and giving it to someone else.
In this land of the free, should this be the way of our country? Is it right to take someone’s property and arbitrarily give it to another? Or, make rules that create a dysfunctional playing field? Have we strayed so far from our founding principles that we accept this as normal?
In this month of July, as we celebrate our independence, I reminisce about how well this great nation did when we focused on the reward of hard work, the pride of achievement, and respect for the rule of law. This country was created with a declaration that inalienable rights of life, liberty, and the pursuit of happiness would be our guide. I wonder how many of us understand this, or believe in it, or would die for this? And how many are willing to let it go away? There is a fine line between slavery and freedom, and a fine balance needed between tyranny and anarchy.
The past decade has shown us what happens when government gets too big, spends too much, and controls too much. One must ponder if it’s time to reverse our present course of action and march in the other direction. My best guess is the housing market and the economy won’t fully recover until we return to what made us great in the first place.
We invite you to call.
Tony Ratchford,
Real Estate Broker
CRS, SRES, ABR
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