This is a very difficult topic to start with, and I hope I don't lose you all right out the gate.  I feel that this is a very serious topic right now and needs some attention.  There are a lot of people wondering how and why the economic situation has affected homes for sale NW AR and especially luxury homes for sale NW AR.  It has also affected much more than just real estate NW AR, our entire local economy has suffered right along with the rest of the country.  I have not done an outline so this might be a very long unorganized article, but we have to start somewhere. 

Once upon a time there was a big bad banker....jk...

Seriously now, as with virtually all problems the real estate scandal that crippled nw ar and the rest of the country began with greed.  It all started on Wall Street where some genius or group of geniuses figured out a way to make tons and tons of money at the world's expense.  They had been selling loan portfolios to investors from other countries like China.  As our economy soared in the 90's and early 2000's they became unable to produce enough investments which were basically home loans from luxury homes nw ar, real estate nw ar, and homes from bentonville, rogers, bella vista, springdale, and other communities throughout the country packaged up as larger investments to keep the investors happy.  The investors were buying up these real estate backed securities as fast as they could produce them and had a huge appetite for more.  So basically, somebody decided to start doing more nonconforming loans and disecting them and packaging them  up with grade A conforming loans and filling the orders this way.  Of course the packaging was so intricate, the investors were not aware of the decreasing quality. 

As this process continued the void resurfaced.  There just weren't enough mortgages to sell.  Furthermore, there wasn't enough real estate and homes for sale in nw ar and the rest of the country to meet the demand.  Well, here's a big problem.  The Wall Street Gurus had already realized that nobody caught on or seemed to care about the poorer rated nonconforming loans packaged up with the good ones.  The next step was quite logical for them.  Considering the fact that those who qualified for conforming loans were more practical and purchased homes for sale nw ar and the rest of the country at pretty much what you would graph as a straight line.  The problem is this straight line could not produce enough investments for the investors.  Another issue was that the amount of nonconforming loans from the few lenders doing them was not enough to keep up either. 

Well, since you can't change the flat line of the steady practical conforming loan crowd, the next logical solution is to creat a line that looks like the ascent path of a 727 with the nonconforming crowd.  Basically the only reason they weren't buying more homes nw ar and luxury homes nw ar was the fact that they could not secure financing.  What happened next?  You got it.  Mortgage bankers started changing their underwriting to allow mortgage brokers the flexibility of giving pretty much anyone with a heart beat a mortgage for homes for sale in nw ar, including luxury homes nw are, and real estate throughout the rest of the country. 

Now we found ourselves in a very unique place.  There weren’t enough homes for sale in Bentonville, bella vista, rogers, nw ar and the rest of the country to fill this gap.  The supply and demand scale was turned upside down and now begins the housing bubble.  Now in order to keep up with this new lucrative markets local banks and builders went absolutely nuts, myself included.  We were unable to see anything except the dollar signs.  You could throw up a house and have it under contract before it was even framed.  It was too easy to sell homes in Bentonville, bella vista, rogers, and nw ar . 

Well, guess what?  We still couldn’t give these investors enough homes for sale which became mortgages, which were packaged up and sold as investments.  Enter stupid greed!  This is far worse than normal greed, this is absolutely insane greed.  This occurred predominately with the local and national banks who provided lending for spec homes and subdivision development.  They began making commercial loans for people who had absolutely no business doing business.  They did loans for people that had absolutely no investment and no ability to repay the loan if the project failed.  A few short months or years ago, they never would have considered making loans like this.  Builders were just selling homes in Bentonville, bella vista, rogers, and nw ar so fast that it was hard for them to pass up on the easy interest. 

Now everything is to the point that 65% of the new mortgages and construction loans were crap.  Raise your hand if you know what happens when you loan someone money who doesn’t have the ability to repay it.  You got it!  People began defaulting on their mortgages.  Of course there is more stupidity behind all of this such as the ARMs or Adjustable Rate Mortgages, Interest Only Loans, and the dreaded Option ARMs (these were often called pick a payment loans, where the buyer could pay as little as 1% interest with no principle every month, and the loans actually negatively amortized or the principal balance increased every month) which was a way of getting a minimum wage person into a mansion and hoping they got rich in the next few years so they could make the payments when they went up about a gazillion percent!

So where are we now? We’ve got Greedy Investors, Stupid Genius Wall Street Brokers, Crazy Mortgage Bankers, Rich Mortgage Brokers, Local Banks acting like they’ve never made a loan before, builders and developers leveraged at more than 100 times their worth….seems like I’m forgetting something….Oh yeah, how could I forget the insurance companies. They couldn’t miss their opportunity at getting a piece of the homes for sale turned investment pie.  How could they profit from this?  Well, they got together with the Wall Street Geniuses and came up with a way to sell even more “packages” of mortgages.  Why not guarantee the investors that the loans would perform?  Seems logical right?  People always pay for their house right?  It was a brilliant way to sell air without risk, right?  It was the perfect plan with one exception… It was all based on a fairy tale.  One thing that centuries of lending and bartering has taught us is that before you loan money to someone they need to demonstrate the ability to repay the loan even in bad times and demonstrate a responsible history of repaying their debt on time.  This history is where all of our lending guidelines came from in the first place.  The sad part is that after all these hundreds of years we still are not able to learn from history.  Our greed blinded us from a very simple fundamental in the lending institution and we completely disregarded the very strong likelihood that these new mortgagees would not be able to repay their mortgage.

So, we’re back to the mortgagees not being able to pay for their mortgages.  Now what happens?  (I will give you the abridged version here because the complete story would take way too many pages.)  First of all the investors’ ROI began to decrease to the point that at the current rate of the time they would not be able to recoup their investment.  They began to study what they bought and realized they had purchased nothing but smoke and mirrors.  Well, they quit buying these risky (once considered sound) investments.  Well the Wall Street idiots and the Mortgage Bankers had a huge supply of new mortgages in some stage of preparation to be sold…We’re talking 100s of millions.  They were leveraged up and did not have the funds  available to sit on them…They purchased them to flip and never planned on holding them all.  And to add salt to the wound the investors were wanting to cash in claims on their insurance policies for their non performing investments, and of course the insurance companies had no money to cover.  Now, the mortgage brokers were lucky enough to go out of business since they were using the funds of the mortgage bankers to finance these homes for sale nw ar including Bentonville, bella vista, rogers, and the rest of the country.  Just going out of business, to me was a gift considering the extent of things.  Now most all of the banks did not have the deposits to back up their loans and they were lending borrowed money for the construction loans and developments.  When the ability to provide financing for homes for sale nw ar, Bentonville, bella vista, rogers and company disappeared so did the builders and developers means of repayment.

Whew!  I told you this was going to a bunch of different directions.  Ok, remember the banks were lending borrowed money to businesses that shouldn’t even be in business?  So an incredibly bad situation gets a little worse.  On top of not being able to sell their inventory, most of these builders and developers were living very lavish lifestyles well above their means.  This means they were living out of their construction and development loans and rolling more and more debt into each new loan.  As long as they were able to get more loans they could defer the deficiency to an eminent date in the future.  Well, the future came.  On top of doing loans that were ridiculous to start with, the banks didn’t even do a good job of making sure that the money they were loaning was going towards what they were loaning it for.  Instead of going into the homes for sale nw ar, Bentonville, rogers, bella vista and such it was going towards big homes, new trucks, luxury boats and anything else a large percentage of these builders and developers wanted.  >>>>>Don’t get me wrong, there were and still are a lot of very reputable builders and developers who got a raw deal.  They did not squander money or do anything wrong and still had to pay the ultimate price because of their bank’s own greed<<<<<  In fact, had the banks done their jobs, most of the people who did squander money never would have had the opportunity to do so.  To me there is nothing worse than greed followed up by laziness.

So, now of course you have builders, developers, and mortgage brokers, and realtors going out of business left and right.  Also you have all of the subcontractors, material providers, and general support people going out of business as well.  The banks are now stuck with unfinished properties they cannot do anything with.  They start to go out of business about the same time a lot of investors and mortgage bankers do.  The insurance companies are screaming and even the automobile manufacturers are feeling the squeeze.  Where do you think all of these vehicles that supported this once dynamic industry came from?…Of course the mortgagees themselves are victims as well.  They’re losing everything they have because they were told they could pay back a loan they never had a chance to.  If they were real good with numbers and discipline, they never would have signed on the dotted line…Hey, just so you know, I’m not pointing fingers here.  I was right in the middle of every bit of it, doing the same stupid crap everyone else was doing and for the same greedy reasons.

Here comes the FED to save the day.  Bless their hearts, if they really knew anything important they probably wouldn’t be politicians.  Jk.  OK now we’re in the worst situation as a country we’ve been in since the Great Depression….who knows maybe worse.  What does the Fed want to do about it?  You got it!  Deny it!  Isn’t that what they do.  Well they could only turn their shoulder so long before they had to act.  So what did they do?....Let me try to be very clear about this.   THE WORST THING THEY POSSIBLY COULD HAVE DONE!  I’m not even talking about bailing out all the genius idiots either.  We all can agree that that was idiotic.  But what they did was much worse than that!  First let’s identify the immediate problem.  WE HAVE AN OVERABUNDANCE OF HOUSING! Can we agree that that was the major problem?  Good.  Let’s take a brake.

Sure there was about a gazillion other devastating issues that we couldn’t  do anything about.  It was already done.  We should be able to agree that if we could find a way to keep those left in their homes there while injecting the surplus of inventory into the population we should be able to eventually recover.  I say let the people who put us here go out of business with the rest of us!  The bail out money should have been used to help the people losing their homes in nw ar, Bentonville, bella vista, rogers and the rest of the country.  After all, had it not been for the greed of all the people we bailed out, they wouldn’t be in the situation they were in…..THAT IS JUST PERSONAL OPINION…WE STILL HAVEN’T GOT TO THE HUGE MISTAKE YET…FEEL FREE TO DISAGREE.  

Ok….let me try to lead up to this.  We were in the situation we were in because credit was given without regard to repayment ability and credit worthiness, right?  The businesses who were fortunate enough to keep their doors open were probably smart enough to figure it out before the rest of the country, right?  Considering the fact that they are in business, ultimately to make money, they probably want to do what they need to do to stay open, right?  Now if lax lending guidelines put them in the situation they were in it would only stand to reason that the opposite would begin to resolve the issue, are you with me?  So, they were going to go back to the old school mentality of doing solid loans.  It didn’t matter what anyone suggested, they got caught with their pants down and they weren’t stupid enough to let it happen again.  There was never a question that this would happen.  The strong will survive.  So, they tightened their belts and held firm to the rate that they lend money at regardless of what that same money cost them to borrow.

Knowing this was happening and would continue to happen, what good would deflating our national currency do?  We all heard the same B.S. “let’s lower interest rates to stimulate people into buying stuff.”  Well they kept lowering and lowering and lowering, problem was, nobody could borrow money.  What good does cheap money do the world if it is only available to the banks who won’t loan it to anyone.  So now, you could buy a home in nw ar, Bentonville, bella vista, rogers and the rest of the country for a super low interest rate if you could only find someone to lend you the money.  Of course, all it did was cause the dollar to lose value.  What happens when all this money is being injected into the economy for less than it’s worth?  The current value becomes the new worth.  If the dollar is worth less, isn’t the things that it buys worth less? 

Welcome to the wonderful world of the stuff you own is worth a lot less than it should be!  I’m talking about homes for sale Bentonville, homes for sale centerton, homes for sale rogers, homes for sale bella vista, luxury homes for sale nw ar, and the rest of the real estate for sale in nw ar and the rest of the country.  By lowering the rates, they decreased the value of the dollar which in turn decreased the value of everything you’ve bought and can buy with it.  So, trying to tie back in here, we agreed that if we could keep people in their homes and interject the surplus of homes into the market we could recover, right?  How can we interject the surplus in the market (I mean sell the empty homes) when they are now worth much less than we as a whole have invested in them because of their deflated value.  Short sales are rampant but the process is slow and tedious, the whole time banks and individuals waiting for their property values to inflate without inflation…????  How can that be?  Here we are at the end.  The dreaded “I” word.  In my confused, twisted little mind I don’t see how we can recover without inflation.  Think about it for a sec….maybe I’m stupid but doesn’t inflation mean that the price or value of something goes up….If you own stuff, isn’t that a good thing?  If you own property, what would you rather have to sell luxury homes nw ar, Bentonville and such a low interest rate but your $100,000.00 upside down, meaning you need to stroke a check for $100,000.00 at closing or a higher interest rate but you’re home is worth what you owe?

You know, I am not an economist, and I’ve always struggled with being able to figure out how the whole financial world really worked, but this just seems to make sense to me.  If you are an economist or financial wizard, please tell me how I’m wrong so I’ll know (unless you’re the one who started all of this crap).  Ultimately, my goal is to sell homes in Bentonville, Bella Vista, Rogers, Springdale, Fayetteville, Centerton, and the rest of NW AR and I believe a little inflation is what we need to start recovering.  I would love it if someone could give me a better solution.  For real do it here, I don’t mind if you make me look stupid.  A solution or at least understanding will do us all some good.  Thanks my friends,  until next time!