Interviews

Waste, Fraud Revealed in Housing Rescue

Situation adding to debt mess?

 

NEIL CAVUTO, HOST OF “YOUR WORLD”: Forget about all the partisan politics. Is the reason real we have this debt mess because of all the bipartisan spending trying to fix things that the government simply cannot?

Take the housing rescue, tens of millions more in waste and fraud just revealed from it.

Uber-realtor Dolly Lenz says this is the kind of stuff which makes a bad housing situation worse and maybe contributed to the 1 percent dip in new home sales we had just reported last month.

We mean well, don’t we? We always mean well.

DOLLY LENZ, MANAGING DIRECTOR AND EXECUTIVE VICE CHAIR, PRUDENTIAL DOUGLAS ELLIMAN: I think so.

(LAUGHTER)

LENZ: I’m not sure.

CAVUTO: So what happened here?

LENZ: I mean, it’s just unbelievable.

Again, it is -- it would -- it might be worthwhile if we had stable prices, we had stable demand, if something had gone right with housing. But nothing has gone right. With all of these $30 billion of housing tax credits, not including possibly the fraud, it’s just amazing.

CAVUTO: But apparently when you take the credits away, the buyers go away. What do you make of that?

LENZ: Yes. So we’re borrowing from the future.

CAVUTO: Right.

LENZ: So the buyer...

(CROSSTALK)

CAVUTO: Is that how it works?

LENZ: Yes. So, we did nothing. So, in other words, whoever would have bought maybe next April bought this April or whichever year we’re referring to. We merely borrowed from the future. Demand dropped. Prices continue to drop. So, absolutely nothing was accomplished by the homebuyer tax credit as far as I’m concerned.

CAVUTO: Do you think people have gotten sort of a Pavlovian response, Dolly, to, I don’t know, like cash for clunkers for cars; unless there’s another incentive program to buy a home, I’m not going to buy a home?

LENZ: I’m not sure. And maybe they’ll buy a home. But maybe they’re going to buy anyway.

You see, I think we have to just leave it alone. Let it find its bottom. Let it finds it natural -- do its natural course. And then I’m sure everything will at some point come back. But if we keep messing with it, everybody’s going to wait for something, as you suggested.

CAVUTO: Right.

LENZ: And nobody’s going to buy anything, or they will just buy it when we give something.

CAVUTO: So, what happens in the interim? I notice year-over-year are never good, but lately month-over-month trends are better, not great, but better. Do you make anything of that?

LENZ: Not really. I mean, it really depends on the product group in that month. It depends on so many things. If there were a lot of high-end sales, that could pull up a few.

We’re finding that in general luxury sales are doing OK. I wouldn’t say well, because the volumes off.

CAVUTO: What constitute luxury sales?

LENZ: Luxury sales are you know over...

CAVUTO: Millions.

LENZ: Millions, yes, many millions.

(CROSSTALK) CAVUTO: Your crowd.

LENZ: Luxury sales are doing still well in terms of pricing. However, they’re doing terribly in terms of volume.

But whoever wants to buy something, the seller is not giving up. They’re waiting. Either you’re going to pay their price or they are not going to sell to you. And it’s working for them. And buyers are paying their price.

So, that kind of up-loads the pricing, such that all the averages go up a little bit. And that’s I think where we are, what we’re seeing.

CAVUTO: How long do you see this going on?

LENZ: As a countrywide thing, I think it could be three to five years. Look, even in all the inventory...

CAVUTO: Three to five years in addition to this?

LENZ: Yes.

Look, even if we look at the inventory numbers, people are saying, oh, it’s only 9.1 months, which is terrible, even if it is only 9.1 months. None of that includes all the developer inventory they haven’t put on the market. I mean, if I counted up New York City inventory, even a good place like New York City, buildings where a developer puts five or six apartments on the market, when they in fact have 400 to sell.

CAVUTO: Oh, my goodness.

LENZ: Now, you imagine where the numbers would be. Then everybody would say, gee, I’m really going to hold off and not buy anything now.

CAVUTO: Are buyers affected by this whole debt mess?

LENZ: Well, without a question, because it’s again about confidence.

Real estate purchases being generally the largest purchase anyone makes is really a confidence play. It’s confidence in the government. It’s confidence in the future of the country. It’s confidence in everything, employment, every aspect of the economy.

And if you don’t have confidence, why are you buying into something? You’re going to wait, again the "catch the falling knife" story.

CAVUTO: And you were saying this affects the very marginal, all the way to the very mega-wealthy, right?

LENZ: Oh, there’s no question. Everybody is saying to me, well, what am I rushing for? Unless they have a need.

See, sometimes, you have a need. You’re relocating to New York. There isn’t something suitable to rent. You have a need; you’re going to buy something. Or you’re trading up. You had just twins, you know, there are reasons to buy, and your employment is secure and you’re financially OK.

So, then, yes, people are buying. But except for those people, I think most people are on the sidelines. And the rental inventory is being taken up. There’s almost no rental inventory on the market, which is a very bad signs for sales. People are renting. People are looking to rent for the next two to three years. And then they’ll look -- then they’ll look into what they are going to do.

CAVUTO: Weird stuff.

LENZ: Mm-hmm.

CAVUTO: Dolly Lenz, thank you very much.

LENZ: Thank you.

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