It is really tough to be a real estate commentator these days.

I have been writing about real estate issues for almost thirty years and rarely have I experienced periods of such turmoil and chaos:

1. A magnitude of housing price declines unlike anything we have seen since the Great Depression.

2. Credit losses that could cost U.S. financial institutions over One Trillion Dollars.

3. Government sponsored entities (Fannie and Freddie) that actually require government sponsored assistance.

4. Estimates that as many as 5 million U.S. homeowners (maybe 7% of total homeowners) could lose their homes to foreclosure.

5. An amazing array of suggestions for preventing future housing and credit-related problems – ranging from the ridiculous to the sublime.

It is this last point that I would like to discuss today — suggestions for preventing another mess like the present one. Let me state my bias up front: we as a society swing from too little to too much all the time. We rush in when the horse is out of the barn and then we invent twenty new ways to keep the horse in the barn when a simple policy of closing the barn down would work fine.

Some of the ideas for improving our housing and financial system are substantive. Some make me laugh. For example, many academics say that we need more disclosure laws and forms. Now, as an attorney who has handled about 5,000 closings I can state assuredly that disclosure forms are not the answer. The fact is that in the heat and pressure of the pre-closing and closing processes no one pays attention to disclosures. All disclosures are good for is preventing lawsuits – so that someone can’t say “You never told me that.”

I could rant on about disclosures and other suggestions but what I really need to do is come up with some solutions of my own.

And here is my Number One Proposal:

Make FINANCIAL LITERACY a required course in every United States high school and university.
It is ridiculous that high schoolers graduate with the ability to vote and serve in the military and participate in all sorts of other activities and yet do not have the most basic understanding of the important financial principles that will impact their lives.

I am not aware of any high school or college course on Financial Literacy. Young people enter the world with no clue as to what a mortgage is, the meaning of amortization or the point of liability insurance. FICO score? What’s that? The risks of credit cards? Just increase my limit…

We as a society are doing our young people a disservice. We need products and programs that will prepare young adults for the real world. Only when we increase the street smarts and financial literacy of our next generations will we prepare ourselves for future messes. The fact is that there will always be opportunities to dig a hole for ourselves – whether it is the tech-stock boom and bust, the housing boom and bust or a Tulip craze.

What we can do is help prepare those who will inherit our earth to recognize and deal with these opportunities and risks – in a better fashion than we did. return to front