Equity

Equity

Ten years ago when I was last in Catalonia, Spain was in the midst of a housing bubble. In a media interview at the time, I objected to the term bubble. Burst bubbles don’t reinflate. Value cycles through expansion, contraction, recession and recovery. Both in Spain and the US, everyone generally ignored this basic economic principle and made decisions based on the fallacy that property value always goes up. Once the “bubble burst” housing markets in Spain and the US froze.

At the 68th FIABCI World Congress last month in Andorra, Juan Velayos the CEO of Neinor Homes gave an excellent report on how his company virtually restarted the Spanish housing market. And again the answer was simple – equity. Markets and household collapse when they are overleveraged. To use an overused phrase, “you need skin in the game”. Yet right now some guy on the radio is telling me I’d be a sucker to put 20% down. He will give me a mortgage for 5% down.

Aside from these basic economic truths however, Mr. Velayos provided keen insight into the structural problems of housing markets worldwide. Housing markets are not institutionalized, housing markets are not industrialized and housing developers ignore their customers. One of the most important drivers of both personal and national wealth remains largely a mom and pop shop.

Even in the developed world, housing markets lack formality and structure. Lessons learned from one developer to another, from one city to another, from one form of finance to another are not passed on and distributed and tested through a system. Neinor Homes was successful by applying the principles of institutionalization to housing markets including transparency, risk rating and strict adherence to policy.

With an acute worldwide housing shortage, home building continues to be more craft than industry. Tons and tons of debris are created tearing down old structures and creating new ones. With all the technical advances in most every other industry, the housing industry touts the ability to turn on your lights remotely as innovation while continuing to inefficiently build the same boxes that have been built for centuries.

Finally most builders don’t care what you want to buy. They build what is most profitable. Customers are so used to this lack of client focus that they are happy to spend their time comparing one indistinguishable box to another. Now is the time for equity in housing markets, both equity in capital and equity in opportunity.

Agency

“There is a lack of agency here – a feeling that you have little control over your life and a willingness to blame everyone but yourself.” J.D. Vance, Hillbilly Elegy

Reading J.D. Vance’s book on a childhood like mine got me searching for this photo of the Berlin Methodist Church in Berlin, TN. US President James K. Polk spoke from a rock near the Berlin Spring. My mother was born only a few hundred yards away.

The book made me think about my journey from poor white trash to big city elite – a journey that started before I was born in a small southern town with plentiful factory jobs. How did I get my belief in my agency? What supportive systems were in place in the 1970’s when I was a pup that are now long gone?

Certainly there are times when we need an agent with more knowledge and access to help us achieve our goal. However today many people’s knowledge and access are restricted not by any external force, but by the choices they make.

The fellow in the photo with the basket of gladiolas has one foot on the ground and one foot in the air. He is supported by a strong community who told him that he has what it takes.

Bill Blog 1

A New Vision

To this temple of peace
We have brought our personal grudges.
Let us forever set them aside.
From this place of unity
Take our fractious egos
And give the World a New Vision.

I wrote this poem in preparation for the FIABCI UN Luncheon on April 4. Many sleepless nights assured a meaningful, positive event in this time of confusion. In this time of mediated reality, we all must realize that all conflict arises from our own hearts and minds. Once we accept responsibility, then the wold will change.