Tuesday, October 21, 2008

It's the eeeevil bankers fault

Key to the Crisis: It's the Housing Market, Stupid - TIME This is an interesting article. While they try really hard to blame the mortgage industry for wanting people to live up to the terms of signed contracts, buried in the guts of the article, more than half way to the end, we discover that conspicuous consumption only works if you can afford it.
But ultimately even lenders' best efforts might be crippled by a harsh reality: plenty of homeowners are never going to be able to pay for their houses, no matter how generous the terms, because someone — the homeowner, the mortgage broker — lied about or simply ignored income and assets. Cena Valladolid, chief operating officer for Consumer Credit Counseling Service of Southern Nevada, says that more than half of the homeowners who seek help from her non-profit are living in houses they never had a realistic shot of affording. The best advice she can offer in the depressed Las Vegas real estate market is to ask the lender to allow a short sale, so that the house might be sold for less than what's owed on the mortgage.
In my current role of caregiver for a sick relative, I get to watch a lot of television. (More than is healthy perhaps.) I find Home and Garden Television a bit disturbing. People buying homes they have no chance of affording. First time home buyers who don't even want to invest the time to paint the interior of a perfectly good house or condo. (They want to buy one that is the color they like - in short, a new home.) What happened to the starter home?

One particularly disturbing person said a reasonable choice was living at home with mama to save more money, because she couldn't afford the house of her dreams. Hello? What happened to that first small apartment? And the parents (helicopters hovering the background) seem to think that is reasonable. Didn't the American Dream used to be about standing on your own, self-reliance, and making a place in the world? When did it become about granite counter-tops and walk-in closets?

I love my parents, but as soon as I graduated from college I got a job and moved out. Actually as soon as I graduated from high school I went to college and except for one summer always had internships or jobs away from home.
In a September 2008 survey by Campbell Communications, an outfit that works with the mortgage industry, property taxes were the third most-cited reason people thought they might stop making mortgage payments, illustrating that the financial pressures on overwhelmed homeowners go far beyond the terms of their loans. "Many of the people who bought homes were not prepared to be homeowners," says survey designer Tom Popik. And all the loan modifications in the world can't change that.
In Florida, it is frequently the case that people are shocked to discover that the cost of insurance is comparable to a mortgage payment. Hurricane coverage is required in most of the state, and it isn't cheap. (And of course, since the state can't let the market set rates - they would be "unfairly high" or something - the state is now one of the largest, if not the largest, wind storm damage insurance provider in Florida.) And they are shocked about loans/taxes/insurance because they spent more time researching what stereo system to put in the family room than they spent researching the true cost of home ownership. They wanted a nice, large house, and they wanted it now. Wanting what you want and wanting it now is the attitude most 2-year-old children have. Yet people seem surprised when that perspective isn't sophisticated enough to deal with the reality of the economy. Adults are supposed to understand the principle of deferred gratification, but whole generations it seems have refused to grow up.

I expect that next the Left will try to force lenders to change the terms of the contracts. (Isn't there something in the constitution about contracts?)

Welcome to the Socialist States of America. (Or is that more of a Fascist state? Hard to tell.)

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