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posted: 7/6/2012 5:28 AM

Looking at real estate's history around the nation's 'birthday'

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With the celebration of Independence Day this week, it's a good time to think about the way U.S. real estate has evolved through the centuries.

Q. How was property bought and sold in the U.S. during the 1600s and 1700s, before realty agents were "invented" and America declared its independence from England?

A. There wasn't much buying or selling for several decades after the Pilgrims landed on Plymouth Rock in 1620. With July Fourth celebrations this week, I'm devoting this entire column to answering some historically related real estate questions.

A few of our nation's forefathers, such as William Penn, were granted huge parcels of land by the King of England. Other newcomers basically laid claim to their parcels for free. But even though formal landownership rights were created by the original colonies in the late 1600s, it didn't trigger a land boom: Many new arrivals saw no need to pay for property in established areas when they could go a few miles away and stake a claim to fertile ground at no charge.

Land "jobbers," the precursors of modern-day agents and developers, began to appear in the 1700s. Their primary job was to assemble small, individually owned parcels that could be packaged together and sold in bulk to wealthy farmers.

Smaller sales back then were tough to pull off, in part because getting credible title to a property was difficult. Even George Washington complained, after paying a 1784 visit to a huge parcel that he acquired before he became president, that the land was occupied by what he termed "squatters," who claimed to have valid ownership of the same property.

Washington also was shocked to learn that other parts of his massive land holdings were being offered for sale "by land jobbers and speculators" to potential buyers in Philadelphia and even Europe. That proves that real estate fraud is about as old as the industry itself.

Q. When we took our kids on vacation a few weeks ago, we drove past a little town in New Mexico called "Truth or Consequences." I used to watch a TV game show that had the same name back when I was a kid in the 1950s. Were the town and the TV show related?

A. Yes. The game show started on radio in 1940, and began airing on television in 1950. To celebrate the radio program's 10th anniversary and boost the ratings of its fledging new TV show, host Ralph Edwards and his producers promised to broadcast live from a city or town that was willing to officially change its name to Truth or Consequences.

A small town in New Mexico town, then called Hot Springs, beat out several other communities from across the U.S. to win the contest and get its new moniker. Local land developers and other businesses leaders were big supporters of the name-change efforts, in part because they believed that the sure-to-come national avalanche of press coverage would boost sales.

They were right: Tourism and other types of business soared after the broadcast, and some visitors decided to make what locals fondly call "T or C" their permanent or vacation home. The city (pop. 6,475) still holds an annual fiesta to commemorate the historic show, and Edwards himself frequently returned to host the event until he passed away in 2005.

Q. I was interested in the recent tips you provided to help people prepay their loans and save money, instead of choosing a typical 30-year mortgage. But who decided that 30-year terms should be the norm, anyway?

A. President Franklin D. Roosevelt essentially created the 30-year mortgage when he formed the Federal Housing Administration in 1934. The FHA was a cornerstone of his famous "New Deal" plan to help pull our country out of the Great Depression.

Before 1934, most buyers had to make at least a 50 percent down payment on a house or farm that they wanted to purchase. The typical loan term was a mere five years, and it required the borrower to make a massive "balloon" payment to pay the balance in full when the loan term ended.

Despite such flaws, that old system worked fairly well until the stock market crashed in 1929. Millions of people were soon thrown out of work and couldn't pay their home loans, which caused foreclosures to skyrocket and worsened the banking crisis.

Sounds familiar, doesn't it?

Today's historians still can't agree why Roosevelt and the FHA decided that 30 years -- rather than 20 or 37 or whatever -- should be the length of their newly created mortgage plan. But it's clear that FDR wanted to make good housing available with affordable monthly payments for every American, while also providing lenders with some type of government backing to encourage them to make more loans and to protect them against future changes in the economy.

Real estate trivia: George Washington's net worth today would be an inflation-adjusted $525 million, thanks largely to the 52,000 acres of farms and other land that he owned west of the Appalachian Mountains, according to an analysis by business news website 24/ President Barack Obama's net worth is about $5 million, though most of his wealth has been accumulated through sales and royalties of his books.

• For the booklets "Straight Talk About Living Trusts" and "Free and Clear: Getting the Mortgage Monkey off Your Back," send $4 for each and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.

2012, Cowles Syndicate Inc.

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