Housing? What housing?

The more I hear through the media about the “housing bubble” the more frustrated I get. For me, the whole thing seems pretty easy. People bought what they couldn’t afford and now have to pay the consequence. Someone paid too much for a home which is now worth less than they still owe for it.

What’s the deal with this though? I blame two groups. The first and most responsible are the people who bought what was out of their league. I’ve always been taught that something that sounds too good to be true probably is. What makes people think anything different when it comes to getting a home mortgage? If you make $50,000 a year you can’t buy that $300,000 house. I’m sorry but it just doesn’t make sense. Yet, this is part of what puts us in our current predicament. Had these people read and understood what they were signing and thought about it we wouldn’t be in as deep as we are currently. Sure, there’s a lot of fine print and things like “interest only” loans sound like great things. But, failure to understand or ask questions about what you read creates huge problems. Of course, I also blame the American mentality of “Well, we’ll worry about that problem when we get to it” for interest only loans.

The second group responsible for a large part of the problem is the lenders. The same “too good to be true” policy still applies. What good does it do the company to lend to someone who can barely afford the mortgage? Sure, it is great to put someone in a home they “own” but if they can’t afford it the payments this puts a heavier burden on the family than the benefit from owning a home. Greed is a bad thing. That’s my personal motto. These companies gambled and lost due to their desire for more money.

But, now what do we do? While it would be GREAT to be able to say “Well , you shouldn’t have loaned out money to these people” it isn’t something we can do. The problem here is that these companies are so firmly ingrained in our financial system that a collapse of one would create substantially greater problems for the economy. Trading and selling mortgages between companies doesn’t help this predicament as they get bundled into securities which make their way into the stock market. There, some people don’t know what they are signing up for and get screwed. Instead of letting these companies who made poor decisions lay in the bed they made, the government has to come bail them out with huge sums of money. This puts the burden on the government for bad corporate decisions.

All the while, the people at these lending companies are still making their salaries despite the trouble they have caused. The vice-presidents and CEOs of these companies have lost little compared with the people they targeted for lending and will probably get severance packages as they are fired for ruining not only the company but contributing to the downfall of an economy.

Meanwhile, people trying to retire are being hit hard. As the stock market dives investment portfolios tank in value. This is due in part due to a lack of diversification but also due to the general downfall of the US and global markets. I haven’t looked at a statement from my broker since December and I’m glad – I’d probably cry if I saw it. This problem needs a solution, and we need it soon. It’s time for corporate America to step up to the plate and get us out of this quagmire they helped create.