1. 1Impact Spring 2012 Edition
Ryan & Coppola Law Firm, LLC Investor’s Guide
Fix the Housing Market – Fix the
Economy

2. H ome ownership represents the foundation of the “American Dream.” The past three years
continue the inexorably slow stabilization of the housing market.
The role of the privately owned home cannot be underestimated in both the psychology and
reality of
the American economy. The home represents the major purchase in most lives. The home, from 1958
to 2008, represented a stable investment with an average 6% annual nominal gain in value. An
average home built in 1959 for $15,000 sold in 2008 for $300,000.
The primary home is integral to economic growth. The entrepreneur, risk taker, and small business
owner often utilize the equity in their home to gain a bank loan for their new enterprise, new product,
and to market their innovation of an existing product.
The harsh reality of the causes and effects of the housing market crash has been thoroughly
researched. Fannie Mae and Freddie Mac, at the behest of specific politicians, began accepting loans
from ever riskier and questionable borrowers. Bankers on Main Street and Wall Street developed a
variety of “products” to move these loans to the investment markets. Using financial alchemy, they
bundled high risk mortgages into securities with high credit ratings.
The market crashed, and these products proved difficult to value, and difficult to untangle.
The housing market is slowly stabilizing, but supply via foreclosure grows faster than demand. This
factor and others lead to continued deflation in housing values. Lenders have more stringent rules for
mortgage loans, which exacerbates the problem.
Potential solutions have been proposed. The most prominent is a reappraisal of homes and
refinancing to their new lower value. This would provide a fast, sharp, deflation (with losses
potentially paid by taxpayers), and puts more cash into the hands of consumers.
Once stabilized, renewed confidence and the desire to seek out risk in new ventures, new loans, and
new investment in undervalued assets will increase. Supply will be absorbed, a positive feedback loop
of investment gains and increased wealth will lead to additional investment, 21st century innovations,
new jobs and increased wealth.
We are in for a long road. In our recent article The Prince Charles Effect, we explained the importance of
demographics and the passing of wealth to the next generation, vis a vis business succession, promotion,
rising income or inheritance. Older executives, who have seen a decline in their retirement savings and
therefore have had to reset their retirement expectations, are slow to hand over the reins of enterprise to
the next generation. Many merge their businesses to create cash flow in order to maintain their existing
lifestyle. This long term consolidation of private business limits the training ground for future owners and
executives and the opportunity to compete in business and gain wealth.
A century ago, America survived the Financial Panic of 1907. The economy recovered rapidly as the
industrial economy continued to expand. As we move toward 2012, we do not have a clear path to
economic growth as there is no obvious sector of the economy to provide significant economic stimulus.
Let’s look at the economy with a 21st century perspective. America is more than one nation and one
economy. America has at least six different regions – Northeast, Mid-Atlantic, South, Midwest, West, and
California. Each region has distinctive assets and capacity.

3. America’s regions have five economies: agriculture, industry, technology, professional services, and the
knowledge economy. Utilizing this perspective, these regions and economies offer a multitude of
businesses and jobs requiring a variety of skill sets.
In short:
Immediate solutions: Sell low, and buy lower.
Long term solutions:
A New Vision Utilizing Old Values: American hard work, honesty, frugality, and pride in a job
well done.
Rebuild American Trust
Reignite the “American Dream”