Daily Content
Fleck's Thoughts

back to article list

Greensperm Screed
by Joe Nelson

Dear Mr Greenspan,

I am 43 years old, my name is Joe Nelson and I earned my real estate license in 1987. I started my real estate career in November of 1987 , only three weeks after the stock market crash of 1987.

As hindsight is 20/20 I now know that the boom started in 1985 ended on October 19th but as you know Dr. Greenspan hope springs eternal in this great country of ours and I had to "make it happen" as a greenhorn in real estate and make my $700 a month living expenses. After making an average of 30 cold calls a day I just barely paid the bills for 18 months until the deterioration of the real estate market became so pronounced (all the hot shot 30 year old brokers started to leave the office) that I knew I had to make a change. That change came when I started performing property inspections and working foreclosure auctions for a bank in Maine. One situation in 1994 really stuck in my memory. A gentleman from Mass. came to a seaside condo auction in Old Orchard Beach , Maine and plopped down a $10,000 cash deposit on a condo and was the high bidder. It was my job to follow up with him for a bank to close the deal. After numerous phone calls were unanswered from the buyer I made it clear in my last message that he was within two days of having his deposit taken for non-performance. His wife called me back and seemed to be in shock that her husband had bought a condo . She said that he would not be closing on the deal and that if that meant that the bank would keep the deposit, so be it. For two more years I worked for that bank, whose shares plummeted to a low of $1 per share in 1994, until the market improved and I moved back into the brokerage community in 1995. The market started to slowly improve and in 1997 I opened my own brokerage company. In late 2001 I started to sense that the market was ready to correct , then September 11th happened. You reduce interest rates dramatically and what was to be a normal recession to work off some minor excesses turned into a second real estate bull market based solely on easy money. In 2004 I sold 3 of the 4 investment properties that I owned because, although I planned to own them until I died, I had seen the carnage in the 1992-1994 real estate bear market and I did not want to be on the wrong of what appeared to be an inevitable bursting bubble. Fast forward to today and I see a market that has corrected anywhere from 10% to 20%, and one that could easily fall another 20% and possibly 40% to get to where we were, relatively speaking, in 1994.

My point is this, in 2001, when I closed my first brokered deal with a 80/20 loan (no money down deal) I knew that most of the people buying could maybe afford the 80% 1st mortgage,but it was very clear to me that with the income and expense fundamentals of the multi-family properties they were purchasing they would not be able to afford the 20% 2nd mortgages. Looking back, many of these buyers have lost their properties to foreclosure and it is of little surprise to me. Those 20% 2nd mortgages were little more than confetti in the mortgage fire that you helped to stoke, and the fire burned so bright and hot that the big logs (the 80% 1st mortgages) were just as easy to incernerate as the kindling (the 20% 2nd mortgages). I am now sitting on a large pile of cash, and thank god, because my income has been reduced by 70% over the past two years. I wish we could have had a real correction in 2001 to work off some of the excess, but you had a tech bubble to work off. This created a real estate bubble the like we have, and I hope will never see again. I know you are a well accomplished economist, but I can't believe that you could sit in the ivory tower that is the Federal Reserve building,with all the data you were privy to and let what happend from 2001 until 2005 occur. Now you incessantly spout that you had nothing to do with creating the problem. I received all of a 2.11 GPA in college and I knew what havoc you were reeking on this great country and acted accordingly. I am now trying to communicate to my wife and kids, who are surrounded by people that are addicted to debt, that we could be up against the most dire of economic time ever seen in this country. They don't know that we are in for, and they look at me with suspect eyes when I try to inform them of such. I wish I didn't have to go through this exercise, and I only wonder if you would have just issued just ONE, yes JUST ONE message from you're BULLY PULPIT at THE FED that Americans were over indulging at the easy money trough and that you were CONCERNED that this could have GRAVE IMPLICATIONS for many Americans. This would have gone a long way to stop guys like me from having to bring the economic hammer down on our own families.