What a couple of weeks/months this has been. Banks closing and being taken over. Insurance companies being sold to the federal government. People with good credit being unable to get loans. Wow… an amazing concurrence of events.
The real estate market collapse is said to be at fault. Too many people got loans they couldn’t afford to buy real estate that seemed to keep going up and up. At the same time fuel prices began to rise, putting more pressure on incomes and the home owners ability to pay the mortgages they could not afford. Higher fuel prices results in higher food prices. Resulting in people being unable to pay their mortgage.
No down payment, 110% financing, stated incomes, high risk sub-prime loans … and so many other gimmicks were used to get to lend money to people who wanted to achieve the ‘American dream’ of home ownership. Builders had a role, they wanted to build homes to make more and more money… they kept building as if the supply of buyers was limitless, they also kept charging more and more, rather than building homes at prices that regular people could afford, they wanted more and more margin.
Real estate sales people wanted to make higher and higher commissions, appraisers wanted to be the ‘go to person’ to make sure the deals went through at the price on the contract. Mortgage brokers did everything they could to ‘figure out’ a way to make the deal happen. Everyone wanted to make money and take a cut. As a result prices climbed and climbed. It got more and more expensive to buy a home.
What people didn’t realize is that at some point incomes needed to keep pace with the rising housing costs and they didn’t.
What should people do now. I don’t think there is an easy answer. I guess the best thing people can do is survive… do whatever they can to pay their bills and keep working.
The one thing I do think everyone should be doing is improving their skills so that once economy improves and companies start hiring, that they will have the skills necessary to get the jobs they need to buy a home and pay for it.
Improving your skills, making yourself more marketable will help to increase your income. This is what will truly keep us all employed and the economy working for all of us.
Tags: banking, careers, employment, financial crises, mortgages, training
