Ron P - I couldn't agree more with your assessment of the economic situation. I have been amazed at the loans that banks etc have given out to people who clearly can't afford them. When I bought my house, I got something in my price range and couldn't imagine doing anything but a fixed rate traditional mortgage and when some of the other forms of mortgages were proposed and I questioned why anyone would want them with the problems they could cause down the road, the loan officer just smiled and said, "Some people don't think about that" or something like that.
I don't have any sympathy for the banks that made these stupid loans to satisfy their own greed or, and I don't mean to be cold or offend anyone, but I don't have a lot of sympathy for someone making $45,000 who thinks they can buy a $300,000 house. Hello. Those numbers don't add up and they never did.
Musings/Ramblings on this issue:
I do think it goes beyond the average joe, or jane, who needs a place to live. In the marketplace where I live, the "average" price of a single family home (1 child) one year ago was $550,000. The average median income was $42,000, or thereabouts. I've often wondered why no one ever asks where those average people were/are expected to live. The fact is, if they didn't already own homes before the prices went up, they probably won't be moving to the Bay area. But considerable numbers were here and stay here.
I know that the housing markets nationwide accelerated wildly in 1990 or thereabouts. It was called a "correction" and is still referred to in those terms. I still find it odd that houses that were built for, say, $75,000 in early 1990 were corrected to a value, of say, $250,000 by the end of the year. That means a whole lot of correcting was going on in terms of cost of materials, labor, land cost, etc.
Unfortunate, then, that only the owner of the house profited. Certainly, then as now, the men who built the house have not appreciated nearly as high a correction on their take-home pay. They can build the houses but then can't afford to live in them.
Now I know it's a whole different story for those who bought before the "correction." Suddenly, in various parts of the country (not everywhere, I know), folks found themselves sitting in homes assessed at a value 5-7 times what they paid. That's a financial security blanket that many folks have enjoyed. Some sold and moved on, almost always to a less-expensive area where their cashed-in equity has vastly improved their quality of living.
But (and there's always a "but" as I am sure you are aware), the truth is that there are a lot of folks out there robbing Peter to pay Paul. And Peter has gotten pissed and put a hit on Paul.
What is truly troublesome about all of this is who allowed it all to happen and who was standing at the doors of those homes approving the loans.
Local news story today on a housing blight said there are tens of thousands of homes out there owned by the institutions that recently failed and that there is now concern that the properties will sit untended, unoccupied and potentially vandalized.
Ramblings exeunt....
