I do agree with you and I do know of a situation where things fell apart beyond the individual's control and they lost their house.
But then I think about what my husband and I did. We researched the area for years before we even decided to move here and buy property. We were well aware that the market was falling. Although we planned on staying here long-term, we set ourselves up in case we had to move. We bought *much* less house than we were qualified for. We got a 15 year fixed rather than a 30 year or an ARM. We've made extra payments. We paid off our other outstanding debt just in case things went wrong.
Now we're in a situation where we've just found out that we *will* be moving in less than two years. As things stand, we'll be able to sell the house for much less than we bought it for - if we have to. By having no other debt, we'll be able to continue to pay the mortgage for years while living in apartments if the house fails to sell.
For some reason, people don't *think* about getting a mortgage anymore. They don't seriously weigh the issues that could come up. They don't ask themselves, "What if we have to move and the house doesn't sell??" "What if I loose my job?" "What if an emergency comes up and I need extra cash?" No. The average person believes that things will always continue as they are today.
When I look at the sacrifices my family has made to behave with financial maturity, it's harder for me to feel sympathetic. I don't blame the "predatory lenders". I blame the suckers who couldn't take an hour to research the loan implications on their own. I blame the government that made it inviting for the banks to take risks on people who obviously couldn't afford it. I blame the people who bought the most expensive house that the bank would allow, leaving themselves house-poor with no wiggle room.
Yes, crap happens and sometimes it really is nobody's fault. But most people who are in foreclosure could've avoided it at many points along the way. There is a reason foreclosures are at a record level. Banks and individuals have never behaved this way en masse before.
You're right - and if we bailed out all the impulsive buyers, they'd multiply next time. Why be careful when there's no downside to bad judgement? I liked your reply, Marie.
“For some reason, people don’t *think* about getting a mortgage anymore. They don’t seriously weigh the issues that could come up. They don’t ask themselves, “What if we have to move and the house doesn’t sell??” “What if I loose my job?” “What if an emergency comes up and I need extra cash?” No. The average person believes that things will always continue as they are today”
That is very true, however, the market, from brokers to real estate agents used full court press propaganda to make everyone feel it was OK to buy anything they could as the market, well, as they say, “Home prices ALWAYS go up”. The funny and sad thing is that the real estate agents and brokers are still saying that propaganda; “Now is the time to buy, prices will only go up from here!”
Today, people are being extremely cautious. Extremely. People that would like to move up, don’t. People that could afford a home, rent. People that could rent stay home with their parents. Some are walking away from large mortgages and are renting. Some are buying smaller homes and then dumping their large mortgages. It seems there is a scramble to economize.
The wife and I knew, as you did, that bad times ahead could mean disaster if we overbought. I bough something 1/3 of what the banks, brokers, and agents said I should buy. It worked out perfectly. We sold last year at a premium price just before that local market collapsed. We are renting and looking at buying. Property prices are in the gutter and washing down the street. Half price on average and still sinking fast. We are finding homes a tad higher than we want to pay, but we’ll wait until the right home at a good price is found.