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The problem is many middle-aged/younger generations never had faced a crisis like this before. They've been brainwashed from the media, government, realtors (NAR), you name it about the "benefits" of owning a home and advocating risky mortgages...
Paul Kedrosky: The Life and Lies of the National Association of Real Estate (http://paul.kedrosky.com/archives/2008/01/08/the_life_and_li.html - broken link)
Ok, so what happens when you take people who prop up the market and combine them w/the following....
-slippery people in the mortgage industry (promoting liar loans....ask CCubs about this one)
-delusional potential homeowners who think that they can afford a 500K loan making 10K/year flipping friggin burgers at Mickey D's.
You get the mess we are in now. Problem is these suckers (ie homeowners) are left holding the bag. Now Govco wants forgive financial bad behavior to make everything all right....
Gotta love the USA!
Yea the younger people were brainwashed by the older supposedly wiser ones that real estate is a great investment and always goes up.
And don't forget about all the older ones who used their home's like ATM machines (because obviously only older ones would actually have equity).
Or they upsized into much larger/more expensive homes.
we still see people trying to use their homes as the proverbial ATM...but, now, they are undeniably declined and I am very happy to do so!
Yes, Coupon is right...I know all about those "liar loans". They are coming to roost now...people reapplying for loans, we require income now...researching their previous loan, they work at the same company, yet, somehow, make 20-30k less per year...
[quote=sheenie2000;12003878]Yea the younger people were brainwashed by the older supposedly wiser ones that real estate is a great investment and always goes up.
QUOTE]
Historically it does - but you have to hold onto it - not flip it and buy up every 2-3 years.
This market correction will end, times will again be good, have no fear. This isn't the first time the market has been bad or needed a correction - and we made it thru the others eventually.
This market correction will end, times will again be good, have no fear. This isn't the first time the market has been bad or needed a correction - and we made it thru the others eventually.
Sure we will. However the end result will the spread between real income and house prices will decline significantly. The choices we have are the destruction of the equity in those homes or the destruction of people's liquid assets (savings), or some combination. The longer we bail out banks and hand people money to buy stuff the larger and more painful this contraction will be.
Oh and none of it will happen until they address the real problems with this economy shich they simply refuse to or even admit to. That problem is the vast exportation of middle class and blue collar jobs out of this country that have the effect of enriching those making those decisions, and little else. When they finally get around to that, is when you will start to see some real change. Until then we are stuck in a government financed quagmire.
Quote:
Originally Posted by CouponJack
The problem is many middle-aged/younger generations never had faced a crisis like this before.
This is correct and part of the reasons behind what I said in Post9. The USA does not have the economy that can support $500M homes for the average family. They thought they did by the very actions you spoke of. The biggest issue now is how many people will be hurt who didn't participate in this insanity.
No doubt that the Government owning the largest auto maker (GMAC), the largest insurance company (AIG) and only who knows how many houses (Fannie Mae, Freedie Mac, Ginnie Mae) is kicking this crisis down the road, prolonging the correction.
Barney Frank has cost us (THE USA) BILLIONS in housing with FHA's loose lending standards.
The Government is the problem, what is the soultion?
we still see people trying to use their homes as the proverbial ATM...but, now, they are undeniably declined and I am very happy to do so!
Yes, Coupon is right...I know all about those "liar loans". They are coming to roost now...people reapplying for loans, we require income now...researching their previous loan, they work at the same company, yet, somehow, make 20-30k less per year...
this is only somewhat true. When my husband's boss applied for a mortgage here they still tried to bully him into 500K when all he wanted was 300K. They didn't verify income. When we refinanced, all they did was call our places of employment. People that still make good money and have perfect credit (like us and the boss) need to be careful and smart b/c they are still coming after us, probably even more than before.
I took a quick scan of the article, 400k mortgage at 200k/yr seems fine. It sounded like just a sad story for this family.
What strikes me is that a few years ago when this happened to a family, no one cared and there was no press. Now that a whole bunch of people, who apparently can't do a simple budget (unlike these people), are losing their homes, I'm supposed to care and it become my burden to bail them out of their poor decisions....
I agree that a 400K mortgage on a 200K budget seems fine, but as someone else pointed out, there was also a boat, luxury cars, and who knows what other luxury items the couple "owned". That to me is living above your means. The house alone is fine, but I think a lot of wealthier people got in over their heads by having every item they purchased be top of the line, and by financing those items. The couple in the article states that their mortgage is $2400/mo. Even after losing one income that shouldn't have been a problem. I think the reason they couldn't pay was because they had so many other expenses from their over the top lifestyle. Just my $.02.
I agree that a 400K mortgage on a 200K budget seems fine, but as someone else pointed out, there was also a boat, luxury cars, and who knows what other luxury items the couple "owned". That to me is living above your means. The house alone is fine, but I think a lot of wealthier people got in over their heads by having every item they purchased be top of the line, and by financing those items. The couple in the article states that their mortgage is $2400/mo. Even after losing one income that shouldn't have been a problem. I think the reason they couldn't pay was because they had so many other expenses from their over the top lifestyle. Just my $.02.
Exactly. And while everyone talks about homes only - I'd be willing to bet that a fair number of people who lost their houses might have been ok if their mortgage was their only real debt / expense. But when a mortgage is added to large car payments, large monthly credit card bills - and a family is living paycheck to paycheck to pay for all of their expenses - then they got nailed as soon as someone lost a job. In general, many people in our society have been living beyond their means for years...and it came back to bite us all in the butt.
I took a quick scan of the article, 400k mortgage at 200k/yr seems fine. ....
Except.... And this is why what I keep saying is so important to understand why this isn't the case, this $200K salary came directly from the false economy of being a credit broker. Their jobs went away because at the macro level, there is no purpose in it. (at least not a $200K one)
This is the USA's basic problem. You don't create wealth in the finance industry. The finance industry shifts wealth and takes wealth from those who do.
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