People can act prudently and still get burned. People can take all the precautions in life they want to and might still get struck by lightning walking down the street.
People acting prudently were NOT the ones who caused the housing bubble and the economic crisis.
Sometimes people who save up in order to make a strong down payment and only buy a smaller house instead of a bigger house because that is what their monthly income can reasonably support, still lose their house because of a tragedy or unusual change in circumstances.
BUT THAT HAS NOTHING TO DO WITH THE MASSIVE HOUSING BUBBLE.
That situation of people who saved up and bought a smaller house instead of bigger house has nothing to do with liars' loans, subprime mortgages, flippers, greedy "young couples" who bought a much bigger house than they could afford because they expect Big Government to take care of them if they guessed wrong on the future direction of the housing market and don't make a bundle of money, 5% down payments, stupid people who don't save any of their paycheck but spend it all, thinking that the government will always be there to save them, etc.
The root cause of the economic crisis is stupid, irresponsible, selfish, greedy people who believe the lies in the popular culture and from the Democrats that they are "entitled" to various things, including a big expensive house that they could not reasonably afford.
Yeah, you’re so wise and good, and you know everything.
So what do you say to this:
My sister lives in Southern California with her husband and 8 year old daughter. Her husband is a pilot for a major airline and she runs a wedding video business.
They bought their home in 2005, a 3 bedroom 2.5 bath ranch home in the suburbs, nothing palatial but clean, safe and pretty. They paid $560,000 and put down 15%. The price was beneath the market average because the sellers had to sell quick. So they thought they got a good deal.
The home value climbed to about $750,000 by 2007 and today it has a market value of about $410,000. They lost all of their hard earned down payment.
Luckily for them they did not need a designer loan to get into the home, but many of their friends and neighbors did. And some of those friends and neighbors walked away from their mortgages.
So now my sister’s wedding video business has fallen on very hard times and the family budget is strained. Her husband has an opportunity to transfer out of California to secure his position but they can’t sell their home. They are thinking of walking away from their mortgage.
Should I telephone them and rant about how irresponsible they are, how foolish they were for ‘buying too much home’?
Now back to you Mr. Boss, can you please lecture us again on how you are so good and wise?