Don't Blame Homeowners for Today's Housing Crisis...
I agree with Margaret's assessment of the situation on 2005 and 2006. Many of my buyers at that time were responsible people that just wanted a piece of the American dream, and a place to call home. Interest rates were good, and most were afraid that if they didn't hurry, they would be priced out of the market.
Fast forward 5 years and they have become my short sale clients. Not because they bought too much house, or used a funky loan.... but because their life circumstances changed. In fact, the majority of my short sales are for conventional 20% down (sometimes more) or FHA buyers that purchased their first home. Job loss, income reduction, illness in the family, etc. are the main reasons I see people in my market area needing to short sale or falling into foreclosure.
So, I agree. It certainly isn't all the homeowners fault.... sometimes you are just a victim of circumstance. Thank you Margaret for a thought provoking and accurate post.
The first thing I read this morning was a featured Activerain blog post titled The McMansion Extra Value Package : Is it REALLY the Bank's Fault You Can't Afford Your Home Now? (That post has been edited, since I first read it and wrote this, to remove the word "greedy" in reference to home buyers.)
I disagree with the premise that all home buyers who took advantage of low-down and no-down loans to buy a home in the early 2000's were greedy, or even over-reaching. There were a lot of responsible people who purchased homes well within their means who have been hurt in today's real estate market. I don't believe it's entirely their own fault if they and others are in a financial crisis now. And I don't really believe it's entirely the bank's fault, either. It's a symptom of the overall dismal economy, in my humble opinion.
Sure, there were some naysayers predicting a housing collapse, but plenty of experts shunned that idea.
To be fair, I think we have to go back to those so-called “bubble years” and remember what the housing market was like for those homebuyers 5 or 6 years ago:
Home buyers qualified for loan programs that were widely available, most people felt secure in their jobs, and there was no reason to expect anything other than continued growth in property values. Level off, maybe... but, in their experience (and ours), home prices never went down before - certainly not for an extended period or with severe cuts like we've seen in the past year or two. We all knew that declining home values might be possible in theory, but it seemed unlikely based on decades of real estate history in this country – certainly in the D.C.-Baltimore-Annapolis triangle, where I live and work.
It's real easy to sit in an ivory tower now, point fingers and, in hindsight, sweep all those home buyers (and banks) with a broad brush labeled “greedy” - It's just not fair or accurate.
In my experience as a REALTOR, responsible people used low-down and no-down loans to purchase an average home - a 2 or 3-bedroom townhouse with an hour-long commute to work or a modest 40-year old split foyer in the D.C. suburbs that needed updating - NOT a McMansion. People felt they had to buy “now” - before home prices went any higher and completely out of reach in their lifetime. They anticipated re-financing in a couple of years, as home prices continued to escalate and their equity grew.
Home buying and borrowing decisions were made in good faith, based on conditions at the time – and no one had a crystal ball in their back pocket to predict the future.
Fast forward five years to 2011, and frustration fills the air as many people lose their jobs or at least their job security, the price for gas and commuting goes up… higher costs for health care loom... taxes and fees are on the rise… bullies and bad guys threaten our kids online and on the street… our nation is threatened daily by extremists who chant in the streets of their homeland, “Down with America!”… and (drum roll, please) home values plummet.
This must be a nightmare!
Unfortunately this is today's reality, but it won't fix anything to play the blame game or wallow in a pity party. Let's go about the business of coping with this situation and finding a way to make lemonade out of lemons. (If it's bad for sellers, it's good for buyers.) It could begin with something as simple as a random act of kindness for a stranger - or a smile.
With that in mind, let me share with you some positive articles about today's real estate market. (This is a real estate blog, after all.) Why don't you pass them on to friends and clients… maybe you can put a smile on someone's face. It's a good start in our job of restoring confidence in the real estate market.
Americans Still Want to Own Homes (TheMReport.com - 6/11)
Housing and Economic Forecasts Points to Rising Activity (NAR – 5/11)
5 Reasons You Should Consider Selling Now (KCM Blog – 5/11)
Still a Good Time to Buy a Home (Gallup Poll – 4/11)
Home Sweet Home. Still. (Pew Research Center – 4/11)
Real estate: It's time to buy again (CNN Money – 3/11)
Why your best investment is a house (Wall Street Journal - 1/11)
Most people who purchased a home 3–6 years ago are still making timely payments on their homes, even though they probably owe more than their homes are currently valued. Give them a break… don't blame them for today's housing crisis. It's not fair!
Honestly, I don't believe real estate professionals or mortgage loan originators have any room to blame home owners for the housing crisis, because most of us went along for the ride a few years ago and even introduced our clients to those low-down and no-down loans. Just sayin'...
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DISCLAIMER: Information contained in this post is deemed reliable on the date of publication, but it is not guaranteed and it is subject to change without notice.
________________________________________________________________________________________For information about communities, homes, and real estate in the D.C. - Baltimore - Annapolis triangle, contact:
Margaret Woda, REALTOR and Associate Broker
Long & Foster Real Estate, Inc. (410) 721-1500 Office
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