Published by the CIPS Network of the National Association of REALTORSŪ
Fourth Quarter 2005
A CIPS Life: One REALTORŪ's Journey
By Marianne Broekmeijer, CIPS, ABRŪ, GRI, TRC
Since receiving my CIPS pin in 1999, I have enjoyed one opportunity after another, always finding new possibilities, better networking, new countries, and people. Already, I’ve traveled twice to Italy, and to France on business. The designation has opened the door to a completely new dimension of my life as a REALTORŪ—the life of a CIPS. Here's my latest story.
During the REALTORSŪ Midyear Meetings in Washington, D.C. in May 2004, as part of the CIPS Network Embassy Visits Program, I participated in a visit to the Royal Netherlands Embassy. For me, this was a trip back to “the old county.” I had moved to the U.S. from The Netherlands nine years earlier. At the Embassy, our group of ten REALTORSŪ, accompanied by NAR Manager of International Networks Megan Roth Abraham, was welcomed by Trade Attaché for Economic Affairs Sheila Karwal. She told us that The Netherlands is one of the largest foreign investors in the U.S., remarking on the very good trade relations between the two countries. After the formal meeting, Ms. Karwal and I had a short, pleasant conversation in our native language.
A year later, Sheila Karwal called Megan Roth Abraham to inquire if I would join a panel she was putting together for a large Dutch delegation coming to the Embassy as part of a study trip on U.S. housing and mortgage markets. Of special interest to them was the U.S. guarantee system for mortgages through the Federal Housing Authority (FHA), secondary market lenders like Ginnie Mae, and Government Sponsored Enterprises (GSEs) such as Fannie May and Freddie Mac, and how this system could be of added value to the European Union (EU). I was honored to accept.
At the Embassy in June, Minister of Economics Rene van Hell moderated the panel.
NAR Senior Economist Lawrence Yun began with an overview of homeownership in the U.S. To provide a rough reference point for comparisons in housing market activity between the U.S. and The Netherlands, he said that The Netherlands, with almost 16 million people and 7 million households, was similar in size to the state of Florida, but that the number of real estate practitioners is significantly different—128,000 REALTORSŪ members in Florida versus 3,700 members of the Dutch Association of Real Estate Brokers and Real Estate Experts (NVM).
Yun ended his comments with a quote from U.S. President Franklin Roosevelt, who led the country during the Second World War, “A nation of homeowners is unconquerable.”
Next, Alex J. Pollock1, Resident Fellow at the American Enterprise Institute, shared his vision on U.S. “Housing GSE’s: Past Triumphs, Present Tensions, Possible Futures. According to Pollock, “the overall goal of a housing finance system is to help create and support property-owning democracy. From 1940-1980 the American housing finance system was based on savings and loan associations. In this period the homeownership rate increased from 43 percent to 65 percent. The ultimate collapse of this system in the 80s is a story too well known to need retelling. After 1980, the capital-market-funded housing structure blossomed.”
He went on to say that “In the past two years, changes in the GSE system very surprising to most observers have occurred. Fannie and Freddie now find themselves
in a defensive posture and the top management of both agencies involuntarily retired after Fannie and Freddie blocked the proposed reform legislation in 2004. Another key factor that may have triggered these changes was the new accounting rule. Now Congress has been considering changes and the Banking Committee Chairman has called the GSE legislation a ‘top priority.’ There might be an opportunity to transition to a new housing financing paradigm: one built on competitive secondary markets instead of a government-sponsored duopoly.”
Panelist William B. Shear, director, financial markets and community investment at the GAO2, commented on the agency’s role in evaluating the U.S. housing finance system. In particular, he discussed GAO evaluations of oversight of GSEs and of the FHA. He cautioned that if the European Union were to adopt a housing finance system like the U.S. system, it could face some very large challenges. He said that the GSEs have federal charters, that they were created to address imperfections in the housing finance markets, and that they were provided a number of benefits that help them fulfill their missions. He also said, however, that these benefits can reduce market discipline and create incentives to undertake business activities that do not necessarily contribute to mission fulfillment, such as lowering borrowing costs to create competitive advantage over other financial institutions. He said effective safety and sound mission regulation is required.
Then, I gave a view of U.S. real estate and mortgage markets from the REALTORŪ and client perspective, highlighting some striking differences between our two countries. For example, homeownership in the Netherlands is at 54 percent, compared to 69 percent for the U.S. Of all mortgages in the Netherlands, 33 percent are government secured; in the U.S. only 3.5 percent of all mortgages are FHA loans. Dutch consumers are also extremely well protected—if they default on a guaranteed loan, the Government will probably waive their debt. Average market time, list price, and the sales price ratio for the U.S. was of great interest to the attendees—particularly impressive was homes in certain areas selling at higher than the asking price.
Finally, Susan Wachter, professor of financial management at the University of Pennsylvania, discussed the history and importance of GSEs, explaining how the 30-year fixed-rate prepayable mortgage (FRM) plays an important role in the stability of both a household budget and the overall economy. She said that, while bank-funded adjustable rate mortgages (ARMs) are a viable alternative to GSEs, providing continued access to the standard GSE-insured FRM provides distinct advantages to consumers and to the overall economy, and that the GSE helps to stabilize household budgets in recessions and during interest rate hikes. In a recessionary market such as 2000-2001, she said, the FRM acts as an automatic stabilizing agent because homeowners can refinance to take advantage of lower long-term mortgage rates that are likely to accompany it. The refinancing boom that started 2001 in the U.S. helped in worldwide recovery, and was directly attributable to the prepayability of the long-term FRM. Today, in a globally booming housing market that may be vulnerable to downturns and interest rate shocks, the FRM also protects the homeowner’s budget, and adds to the overall stability of the economy. It is an open question, she said, whether the banking system alone, without an active secondary market, can support the pervasive use of long-term, prepayable FRMs. The question will become more important of the global integration of mortgage markets leads to the potential for shocks that build on each other as they cross national borders.
After the panelists completed their remarks, there was a lively discussion with Q & A. The meeting ended with dinner at the residence of Rene van Hell. My next international experience was planned during that dinner—Gerard Cremers, Executive Director of NVM, invited me to visit, saying he would arrange a two to three day tour to see how real estate practitioners work in The Netherlands.
That’s the life of a CIPS!
1 www.aei.org/include/scholar_print.asp?scholarID=88
2 U.S. Government Accountability Office (www.gao.gov)
Marianne Broekmeijer, William Raveis International, Greenwich, Connecticut, originally from the Netherlands where she was a college teacher, knows what it is like to move to another country. Specializing in international relocation, she speaks fluent English, Dutch and Italian, and is proficient in both German and French. She chaired the 2004 International Committee and serves on the Board of Directors for the Connecticut Association of REALTORSŪ, and is a member of the 2005 NAR International Operations Committee and the CIPS Advisory Group. Reach her at +1.203.913.6068 or at marianne@broekmeijer.com.
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