Our financial system is crumbling this week.

[ghostrunner]

These are all strawmen arguments. Or at the very least, I think it's unfair to tag them onto responses to people here who clearly don't share those same views.

I don't think so. If people want to disagree, that's fine. They can explain why.

Do you not put any blame on the consumer? I certainly don't give the banks a free pass, and would probably blame them as much as the buyer. But, to not hold the individual accountable for taking out a loan he/she couldn't afford simply because someone on the TV said housing would continue to go up is ludicrous.

There's a spectrum. Some people undoubtedly took on loans that made no sense, while other people have taken affordable mortgages only to find themselves underwater when prices crashed. Anyway, the reasons for the large scale increase in borrowing are structural in nature and not due to changes in personality.

Glad you said that. I understand wanting to inflict some economic justice on goofballs, but there's no way to differentiate between them and people who caught a bad break and are now stuck with a house they can't pay for and can't easily sell. At this point, anyone who's been saving money in 401ks is now set back in some way and it's probably affected how they're spending the rest of their money, and how much of it they have to spend. Doesn't make sense to me to have more people out on their ear when they could be better off in a year or so.

[Diddy]

These are all strawmen arguments. Or at the very least, I think it's unfair to tag them onto responses to people here who clearly don't share those same views.

I don't think so. If people want to disagree, that's fine. They can explain why.

Do you not put any blame on the consumer? I certainly don't give the banks a free pass, and would probably blame them as much as the buyer. But, to not hold the individual accountable for taking out a loan he/she couldn't afford simply because someone on the TV said housing would continue to go up is ludicrous.

There's a spectrum. Some people undoubtedly took on loans that made no sense, while other people have taken affordable mortgages only to find themselves underwater when prices crashed. Anyway, the reasons for the large scale increase in borrowing are structural in nature and not due to changes in personality.

Glad you said that. I understand wanting to inflict some economic justice on goofballs, but there's no way to differentiate between them and people who caught a bad break and are now stuck with a house they can't pay for and can't easily sell. At this point, anyone who's been saving money in 401ks is now set back in some way and it's probably affected how they're spending the rest of their money, and how much of it they have to spend. Doesn't make sense to me to have more people out on their ear when they could be better off in a year or so.

Does anyone else think tha all of this stimulis and current policies will result in even worse individual financial decisions in the future? Its seriously just making me want to go out and buy something i cant afford because someone else will pay it off.

[Popeye_Card]

These are all strawmen arguments. Or at the very least, I think it's unfair to tag them onto responses to people here who clearly don't share those same views.

I don't think so. If people want to disagree, that's fine. They can explain why.

Do you not put any blame on the consumer? I certainly don't give the banks a free pass, and would probably blame them as much as the buyer. But, to not hold the individual accountable for taking out a loan he/she couldn't afford simply because someone on the TV said housing would continue to go up is ludicrous.

There's a spectrum. Some people undoubtedly took on loans that made no sense, while other people have taken affordable mortgages only to find themselves underwater when prices crashed. Anyway, the reasons for the large scale increase in borrowing are structural in nature and not due to changes in personality.

One also has to consider that the rising home prices/values made everyone have to spend more to buy a house. Or if not buying, spend more to rent a house/apartment. I'm guessing that the average home price inflation outpaced the average salary inflation over the last 25 years by a good margin.

My point being, you take a responsible couple with decent white-collar incomes, and they could have afforded a nice 2 BR house in California 15 years ago. In 2005, a similar starter home in the same area could cost them over $500k.

[TimeForGuinness]

I pretty much think you can blame everyone on the current crisis.

Banks
Realtors
Appraisers
Buyers


Greed feeds greed until the bubble went pop.

[AWvsCBsteeeerike3]

These are all strawmen arguments. Or at the very least, I think it's unfair to tag them onto responses to people here who clearly don't share those same views.

I don't think so. If people want to disagree, that's fine. They can explain why.

Do you not put any blame on the consumer? I certainly don't give the banks a free pass, and would probably blame them as much as the buyer. But, to not hold the individual accountable for taking out a loan he/she couldn't afford simply because someone on the TV said housing would continue to go up is ludicrous.

There's a spectrum. Some people undoubtedly took on loans that made no sense, while other people have taken affordable mortgages only to find themselves underwater when prices crashed. Anyway, the reasons for the large scale increase in borrowing are structural in nature and not due to changes in personality.

This is where we differ. Like I said in my previous post, they shouldn't be anywhere near a mortgage that has the potential to bankrupt them. Even with the housing prices falling, that doesn't impact their mortgage payment, so, in theory, they should be able to afford their mortgage still. These people got greedy b/c they're 100% ignorant of finances apparently. Now, the intelligent, down to earth people are paying for other people's stupidity and greed (not just buyers). That, imo, is wrong.

And, I'm not an economist, accountant, financial advisor or anything like that.

[Popeye_Card]

These are all strawmen arguments. Or at the very least, I think it's unfair to tag them onto responses to people here who clearly don't share those same views.

I don't think so. If people want to disagree, that's fine. They can explain why.

Do you not put any blame on the consumer? I certainly don't give the banks a free pass, and would probably blame them as much as the buyer. But, to not hold the individual accountable for taking out a loan he/she couldn't afford simply because someone on the TV said housing would continue to go up is ludicrous.

There's a spectrum. Some people undoubtedly took on loans that made no sense, while other people have taken affordable mortgages only to find themselves underwater when prices crashed. Anyway, the reasons for the large scale increase in borrowing are structural in nature and not due to changes in personality.

This is where we differ. Like I said in my previous post, they shouldn't be anywhere near a mortgage that has the potential to bankrupt them. Even with the housing prices falling, that doesn't impact their mortgage payment, so, in theory, they should be able to afford their mortgage still. These people got greedy b/c they're 100% ignorant of finances apparently. Now, the intelligent, down to earth people are paying for other people's stupidity and greed (not just buyers). That, imo, is wrong.

And, I'm not an economist, accountant, financial advisor or anything like that.

What if they had the means to pay their mortgage before, but have since lost their job(s) in the recent economy, and they can't sell their house because the real estate market is currently flooded?

[Arthur Dent]

What if they had the means to pay their mortgage before, but have since lost their job(s) in the recent economy, and they can't sell their house because the real estate market is currently flooded?

When prices fall, you may have to bring cash to the closing. Potentially a lot of cash. Accepting foreclosure may be a smarter option.

[Popeye_Card]

What if they had the means to pay their mortgage before, but have since lost their job(s) in the recent economy, and they can't sell their house because the real estate market is currently flooded?

When prices fall, you may have to bring cash to the closing. Potentially a lot of cash. Accepting foreclosure may be a smarter option.

Yeah, selling/foreclosure--whichever. I simply meant that a person/couple/family who may have been able to afford their house 6 months ago no longer can if they lose their jobs. Theoretically, you should have 3+ months worth of savings, but you may be out of work longer than that, and your house isn't a very liquid asset to get out of while the debt racks up quickly when you have no income.

I can afford my house right now on my single income, and I have savings to get me by for a few months. But if I were to suddenly lose my job without being able to find a new one quickly, I'd have to get out of my house/mortgage pretty fast.

[AWvsCBsteeeerike3]

These are all strawmen arguments. Or at the very least, I think it's unfair to tag them onto responses to people here who clearly don't share those same views.

I don't think so. If people want to disagree, that's fine. They can explain why.

Do you not put any blame on the consumer? I certainly don't give the banks a free pass, and would probably blame them as much as the buyer. But, to not hold the individual accountable for taking out a loan he/she couldn't afford simply because someone on the TV said housing would continue to go up is ludicrous.

There's a spectrum. Some people undoubtedly took on loans that made no sense, while other people have taken affordable mortgages only to find themselves underwater when prices crashed. Anyway, the reasons for the large scale increase in borrowing are structural in nature and not due to changes in personality.

This is where we differ. Like I said in my previous post, they shouldn't be anywhere near a mortgage that has the potential to bankrupt them. Even with the housing prices falling, that doesn't impact their mortgage payment, so, in theory, they should be able to afford their mortgage still. These people got greedy b/c they're 100% ignorant of finances apparently. Now, the intelligent, down to earth people are paying for other people's stupidity and greed (not just buyers). That, imo, is wrong.

And, I'm not an economist, accountant, financial advisor or anything like that.

What if they had the means to pay their mortgage before, but have since lost their job(s) in the recent economy, and they can't sell their house because the real estate market is currently flooded?

Why are they buying a house if they are month to month on their bills? That's a horrible idea. If someone bought a house in 05 and got laid off in 08 and has a year of mortgage payments built up and in 09 runs out of money, then that i understand.....however, that's not what is going on. a lot of people bought thinking they'd make a quick buck, then foreclosed when they realized they couldn't/couldn't afford their mortgage.

Just b/c a lot of people did it doesn't make it any less dumb.

[Arthur Dent]

One also has to consider that the rising home prices/values made everyone have to spend more to buy a house. Or if not buying, spend more to rent a house/apartment. I'm guessing that the average home price inflation outpaced the average salary inflation over the last 25 years by a good margin.

The current housing bubble started around 2000 or so, but over that period, house prices have massively outpaced inflation (the historical home price trend). Interestingly, rents did not really increase. A clear bubble signature. In the bubble markets, it was pretty much impossible to buy a house without paying a bubble price.