Wow what a mess!! Now the government has stepped in to bail out the big guys Fannie Mae and Freddie Mac So how did we get here? I believe it all started with Greed. You would think that Americans would have learned after the dot-com bubble you cannot take something way up and Not expect it to come crashing down. 

Here's how it happened in Michigan. In 1994 Michigan passed Proposal A which basically cut property taxes in half, at least in Macomb County. About the same time, interest rates had dropped from 9.33% to 7.32% and the dot-com was just getting started. People felt Rich and it basically created the "Perfect Storm". We had builders; tons of them building subdivision after subdivision. People could stay in their old home or move to a new one for close to the same monthly payment. So many did. We had very happy cities and townships getting more money from property taxes. Then there were the "Buy Now, Pay Later" stores offering to furnish all those new homes. Added to this were hundreds of New mortgage companies loaning anyone and everyone money. Plus many new real estate agents joining in to help. In 1995 there were 726,251 members of the National Association of REALTORS. We were headed up and this was just the beginning.

For the next 6 years we were in a heavy sellers market, we saw Real Estate prices go up and up. People had plenty of equity in their homes, lots of money in their 401K's and they were spending money like crazy. They were also borrowing from their new found ATM's (their homes). Life was good ... or so we thought. Then came September 11, 2001. Well it slowed us down a bit and switched us to a buyers' market, but people were still buying and refinancing Thanks to the subprime mortgages. At least until the end of 2004 when ...

POP - yep Greed popped the housing bubble too. The large builders moved on to other states, the small builders closed up shop leaving behind hundreds without work. Those that were left were just trying to stay afloat. Cities were now starting to lose tax dollars with dropping property values. Many businesses were filing bankruptcy and property values were now starting to decline, causing tons of short sales and foreclosures. On top of that, thousands of mortgage brokers, title companies and real estate agents were with out jobs . Adding to that were problems in the automotive arena. The boom in Macomb County was over. The subprime mortgage mess was getting ready to fall. Ten years later there were now 1,369,411 members of the National Association of REALTORS and that number has been declining since.

Left behind in the dust are the people that did do the right thing. They did a budget. They cut back. They didn't use their equity. They didn't get a risky mortgage. These are the ones that worked a 2nd job and quit spending, the ones that did not buy all the toys like Big Screen TV's and big status vehicles; These are the folks that will stay in their Home and not foreclosure on their "investment". Unfortunately, these are the same people that will lose money in their 401K when this mess is over and lose equity in their homes as a result of the foreclosures. The hardest hit will be some of our seniors who will not only lose equity but whose pensions will also be affected by the mortgage mess. But both groups will lose even more as they spend money to help Uncle Sam bail out Fannie Mae and Freddie Mac.

The good news is we are starting to see signs that we may be headed into a balanced real estate market. One with normal appreciation like we had in the late 80's.