Finding the Culprits in the Housing Industry Problems

September 20, 2007

The recent housing industry problems have people pointing every direction for blame. It has to be the greed of the mortgage companies. No wait; it is the lack of regulations by the government. No wait, it’s the economy - and the federal reserves - that keeps driving up interest rates. No wait; it’s the real estate market that is eager to move property. The real culprits for the current housing crisis are rarely discussed.

Consumers are responsible for what they buy and the terms negotiated for the purchase. The main problem is that consumers’ eyes are too big for their wallet. I know couples now, who are struggling with their finances, who have a five bedroom home and only four family members. The idea of getting a smaller home (that would be easier to maintain, have the family interacting more often, and cost hundreds of less per month) seems not only foreign to these folks, but almost insulting.

If the buyers would only spend what they could actually afford - instead of buying something they MIGHT be able to pay for if a new raise comes through or a new job, then they wouldn’t be complaining about the cost of the subprime mortgages because they wouldn’t have one.

This finance crisis should be a hard lesson learned by all - but specifically the borrowers. If something sounds too good to be true that is because it is. If the government bails out the troubled industry or the consumers, no one will ever learn.

Category Posted in Financing, The Market

One Response to “Finding the Culprits in the Housing Industry Problems”

Saving Without A Budget said:

September 21st, 2007 at 3:54 pm

First off, thanks for referencing my site. Secondly, I agree with you regarding the fact that many American consumers have bitten off much more than they can chew. For the past two years (and probably this year, too) the personal savings rate has been negative - meaning we’re spending more than we earn.

We have a massive credit bubble on our hands, and if this doesn’t resolve itself very carefully, we’re going to end up in a depression, not a recession.