Okay, I'm going to weigh in with my two cents on the current economic crisis.
Anyone who says they couldn't see this coming wasn't paying any attention. The housing market was so artificially inflated that it was silly. Houses in my mom's neighborhood were selling for $280k. These are forty-five year old, twelve hundred square feet track homes people. Now the two foreclosures next door are selling for $99K. And I don't think it's hit rock bottom yet.
Here is how I see it happened. Greed, pure and simple. Oh, everyone can tell you that it wasn't, that it was just people wanting the "American" dream, to own their own house. Just like in the 1950's. But it isn't true. People wanted BIG houses, then BIGGER houses. The average home size in the 1950's was 1,100 square feet. The average home size today is 2,342 square feet. With smaller families than there were in the 1950's. And people were determined to get the BIGGEST home they 'could afford' even if that meant an "interest only" or 'adjustable rate' mortgage, with the 'knowledge' that home prices would rise and they could re-finance and take out their equity and buy an even BIGGER house. But that's a little like taking your paycheck to the casino to bet it all on red. The house always wins. Yes, some people may come out ahead but most people are going to lose it all. But greed drove the market.
I'm not just blaming individuals. It's the fault of greedy mortgage brokers who pushed through half-million dollar loans for people who made $12.75 an hour. It's the fault of greedy real estate agents who sold houses that cost too much to people who they new darn well couldn't afford it. It's the fault of greedy Wall Street brokers who bought all those 'mortgage backed securities' and packaged them again and again, knowing full well that they were faulty to begin with.
Now the taxpayers of this country are being asked to kick in $700 BILLION dollars to bail out all of these greedy people. I'm kind of ticked off about this because I wasn't one of the greedy ones. No one in my family was. My mom could have sold her house and bought a bigger one but she didn't because she owns her home, free and clear, and she knew it was smarter to have no payments than to buy a giant house and owe hundreds of thousands of dollars. But she and I and you will be paying for that greed anyway. Not fair, but as my dad used to say, nothing in life is fair.
The reason given for this bailout is to stabilize Wall Street and keep the U.S. economy strong. There are guys much smarter than me that think this is the solution and without talking to them face-to-face, I can't really argue that they are wrong. But I do know this...if the American economy fails, the whole world falls. It is in the best interest of the entire WORLD to keep America strong. Because all of those growing economies like China and India will have no one to buy all of the goods and services they sell. America consumes eighty percent of the world's goods. Without our consumption, the rest of the world's economies fail too. Simple math. We can't support the rest of the world if we have no money.
I think there will be a lot more stability once the election is over. No matter who wins, people will be able to see who the leader of the free world will be. Housing prices will eventually bottom out and people will be able to afford houses again. Of course, it will be tougher to get a loan but that's how it was for our parents who needed things like down payments and proof of income. And maybe we will learn the lesson that wanting the dream is fine, we just need to be realistic as to what that dream should be. You don't NEED a McMansion and a gas guzzling Hummer. Buy what you can afford. Save for a rainy day. Sure, it isn't much fun, but neither is a foreclosed house and a bad credit rating.
2 comments:
Bravo, Shae!!! I could not have said it any better. How it could even be legal for some of those loans and deals to go through is beyond me. I'm not a huge fan of the government regulating everything, but if you want to keep gov't regulation out of your business, whatever it is, you have to act responsibly. You can't just throw money at people who aren't going to be able to pay it back. And how stupid were these organizations that bought those loans?
I bought my first (possibly only) house seven years ago. I made a good salary, had an excellent credit rating, and a down payment I had saved up. My mortgage broker was ready to propose! He said I made his job easy. I had no idea that people were so foolish as to not do it the way I did. I also was surprised at the amount of money they were willing to loan me. Had I accepted one of those larger loans I could have bought a house two or three times the size of the one I have. But I knew what I could pay monthly, and I also thought about heating bills, electricity, property taxes, etc. All the other stuff beyond the mortgage payment. The bigger the house, the bigger those bills are.
So while I admit I wish I had a little more space sometimes, I am glad in times like these that I knew enough to buy what I could afford, not what the loan people would have let me buy. Ditto for using credit cards. If I can't pay cash for it, there's no point in putting it on my credit card because I can't afford it. Why make something even more expensive by adding credit card interest to it?
But we have become a country populated by people who think they are entitled to everything they see on TV (a big fat plasma one, of course). And you know what? You are entitled to it...as long as you work for it until you can pay for it, all the while keeping in mind that you have a retirement to plan for.
So I hope some lessons have been learned here. I somehow doubt it, but I can always hope.
I'm a spender. I don't go overboard for the most part, but when I want something, I do whatever it takes to get it. I usually...(emphasize usually) don't make bad financial decisions. I do have school loans up the yin yang, but I was always under the impression that you can't put a price on education.
My problem is that I feel I am entitled to a life with as many comforts as I want...whether it be buying drinks for friends, a sexy outfit, or a washing machine. Because you know what? Life is short. I like to do what makes me happy. I don't know if I'll be around for retirement. But I know I'm not going to live like a pauper, stressing about money, so that I can hopefully spend when I'm old and unable to do the things I love. I could die tomorrow! I'm not going to deny myself something because I don't have enough cash on me at the moment.
Now, if I had a family and other huge responsibilities, I may have a different attitude, because I'd want THEM to be happy, for a long time. But I don't. I'm not against saving and not spending beyond your means, but there are certain people that never get to experience life because they are too busy pinching pennies.
Balance is what people in this society are lacking. Moderation. If you want more than you need, that's okay, just don't drive yourself into financial hell. Common sense people!
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