Not mention everyone is telling you that you have to get in now, now, NOW! My wife was convinced if we didn’t buy immediately, we would be priced out forever. She would have been right if the bubble had lasted forever. Bubbles have come and gone before, but in the past, it was usually stock investors who got taken in. Investors are assumed to have a little knowledge about what they are investing in. This bubble was, at one level, aimed at people who had little experience with bubbles. Of course, even the pros who have seen multiple bubbles still seem to get caught up in it yet again.
I think any long term solution need to include a plan to increase the general financial literacy of the population.
Let’s put the blame for this where it belongs. Some mortgage lenders made big fees selling subprimes, and investors bought high interest low risk (supposedly) mortgage backed securities - so much so that there was strong demand for lenders to push subprimes. So the banks weren’t reluctantly making risky loans to people walking in, they were pushing the loans on people. If everyone had degrees in economics the problem would be smaller, but the loans were being pushed on those least likely to be able to see through them. Some qualified for safer loans weren’t even given the option. The borrowers mistake was thinking that a licensed mortgage broker wasn’t a weasel.
In another post you said
The heads of American companies need to understand that they can’t keep paying rock bottom wages while raking in the millions and expecting their employees to turn around and be customers forever. We’re saving now, and the economy is tanking. Wage increases need to come from productivity improvements, but we’ve had better productivity with no wage increases (except for the rich.) I agree it would have been better if everyone stopped spending earlier and forced the recession to occur in the middle of the Bush administration - say early 2004. But Greenspan deliberately kept interest rates low to encourage the behavior you object to, and didn’t do anything when the bubble was obvious. It’s a shame the working guy seeing himself get further and further from home ownership took the bait, but I think most of the blame goes to the fisherman, not the fish.
On the other hand, living in California I know people who didn’t buy in 2004 because the prices were too high, and then watched as they got further behind. Hindsight is wonderful. There were ways the Fed could have helped in a soft landing, which Greenspan refused to use - reining in subprimes for one thing.
Please note: we don’t have nearly enough low-to-moderate income housing. There’s no money in it, the big bucks were in upper-income suburban housing. Easy to get financing to build such housing, nearly impossible to get for low-to-moderate.
Under such circumstances, its more or less inevitable that you will run out of buyers who can afford such housing. Unless, of course, you bend the rules a little. Even as it happened, no one seemed to notice (or care) that we were selling more upper income units than we had upper-income people to buy them.
And month after month, when confronted by troubling questions about a policy that funded a ruinously expensive war on the credit card, the Bushiviks would smugly point to the “housing boom” as proof that all was swell.
We’re gonna have to come up with some way to sell those houses to people who previously could not afford them, but not by bankrupting them or the lenders. Otherwise, those units will simply sit there waiting for a massive upsurge in higher income buyers to occur.
Which very well may not happen. Frankly, I think the economy will recover, but not to the level of our previous delusions.
So I see a possibility for a Jon Stewart type of program to subsidize lower income buyers for housing previously beyond their reach.
The lenders, the bankers, are part of the American people. The American people as a whole want to believe in magic. They would never vote for a candidate who promised them “blood, tears, toil and sweat”. They would never vote for a candidate who tells them “we have to raise taxes and lower spending, we cannot continue to just keep borrowing”. They would never vote for a candidate who tells them the honest truth. The American people, as a group, as a whole, as a people, get the government they want: one which lies to them and promises imposible things. And the American people are foolish enough to believe it is possible. They have no one else to blame but themselves.
Yes, individually many were responsible, others were ignorant, others were foolish, but when your fellow people make stupid decisions everybody pays. You can’t opt out. The American people, as a whole, voted and implemented the mess. It is foolish to put the blame now on Bush, Maddoff or a few individuals. Those individuals took advantage of a system that was voted by the people. That’s the thing about democracy: when things go wrong you have no one to blame but your(collective)selves.
Although tempered by this blow I predict America will continue to live beyond its means for several more generations until it hits hard rock bottom. Prudent and wise individuals will continue to make prudent decisions in their private lives but as a country America will not return to the austerity that built the country. Nobody wants that and everybody wants to believe you can spend more than you earn and still come out ahead.
In some parts of California (not where we bought, thank god!), prices are already down to 2004 levels and still falling. If the people you know have been saving money the whole time, they should be able to buy a better house this year then they could of in 2004. Of course if they put that savings in the stock market, they may be screwed.
Look at all the great public works built in the first half of the 20th century. The bridges in San Francisco, New York, etc. All those that today there is hardly enough money to even maintain. Who built them? What was the standard of living of those workers? What was their credit card debt? How many cars, TVs, etc did they own?
The generations up to about 1960 produced more than they consumed and after that the trend reversed and the baby boomers who grew up in comfort felt they were owed everything in exchange for almost nothing.
I agree. A lot of people who grew up extraordinarily lucky said “All that matters is LOWER MY TAXES” and so politicians are elected who are perfectly willing to let the very blood and bones of society rot out from beneath us if it lets them hand out more fat tax breaks for the rich and the privileged.
It’s sad beyond comprehension that it takes something as huge as the current economic crisis to get people to have even the slightest interest in the infrastructure that makes society work.
Are they carrying Coach purses and have iPhones? If not, I’m not talking about them, and I have sympathy for them - I know people in that situation and its sad to be trying to make ends meet on a modest income - and then have that rug pulled. If they are carrying Coach purses and iPhones, they were stupid.
I have a lot of sympathy for the working poor - many of whom are now the non-working poor. I have little sympathy in this situation for the working middle class who spent the last five years using their house as an ATM so they could live a lifestyle they couldn’t afford (my ex-sister in law, my sister). And, in fact, I have a hell of a lot of animosity toward those people - because they - as much as anyone, have helped create a credit crunch that is putting everyone at risk.
I hang on another board rife with conspicuous consumption. The current whine is “how am I supposed to pay off $40k in credit card debt when my husband just got laid off - and does anyone know where I can get a cheaper manicure” - these are people who live in 3000 sq ft houses and drive new model SUVs (and were whining last summer because ‘gas is so expensive, I can’t make ends meet’). I hang there because it reminds me not to want - that having isn’t what makes you happy and comes with its own stress.
But seriously, folks, I’m at a bit of a loss if to provide a single authoritative citation to “prove” my data point, this has been so long a part of the environment, one doesn’t know where to begin. There are organizations devoted to resolving the problem, but that can hardly be taken as proof that the problem exists, you know how those do-gooders can be, sometimes.
http://www.nlihc.org/template/index.cfm is a good portal for info, but they already believe a problem exists, and needs to be solved, so what do I do? I don’t know of any “Hell, no, there isn’t any shortage of low income housing” sites, but its hard to imagine no such thing exists, what with the existence of a Flat Earth Society and a Republican Party…
These posts illustrate very well my point. Americans enjoy bigger houses, get cheaper housing, use more energy, get cheaper energy, etc. than other developed countries and they feel this is a God-given right which cannot be taken away. Never mind that other people work just as hard and live with less. Americans do not care, they want to continue with the drunken party of spending way beyond their means. We all know individuals like that. They live beyond their means, they believe it is their right and they do not want to understand anything else. That is America today.
But 10% of the world can live in wasting luxury only because the other 90% lives in squalor and that is slowly coming to an end. As it should.
Years ago my roomate would complain that he went to the Chinese-owned corner store and the young girl who was studying there would not leave her homework to attend him but he would have to wait a moment for someone else. He then went on to say that was no life for humans, living in the store, working long hours seven days a week, the kids spending all their time studying… Well, he chose not to do that but he cannot complain when those kids become his bosses in life and enjoy better lives.
Americans want to consume more than they produce – forever. It is not possible and the sooner America learns that the sooner something might be done. Trying to ignore the problem only means it will be worse by the time it reaches the bottom.
I’m going to have to ask you to explain how the two comments you quoted specifically related to this conclusion. Because otherwise, it just sounds like old-man-cranky-pants-everything-was-better-in-my-day bullshit.
I think I explained well enough. Like the Washington Post, “if you don’t get it, you don’t get it”.
And I have no idea what the “things were better in my day” bullshit is about. Now is my day and my time. 2009. Just because I am intelligent does not mean I am old.
You’ve explained jack shit. Is there a shortage of low and middle priced housing or isn’t there? And what does this have to do with Americans being spoiled brats rather than just a market failure?
Oh, then what’s all this “Back in the old days, there were 5,000 of us building the Golden Gate Bridge. If you were lucky enough not to be one of the 10 percent who died every day, you went home to your corrugated tin shack and had your bowl of gruel and you were happy about it, because you were one day closer to your death” business?
You seem to be idealizing a time in which the vast majority of people lived miserable lives until they died so that a select few could live in luxury and berating “Americans today” because they want to be able to keep the fruits of their labor rather than handing it off to an oligarchy.
The truth is that people aren’t vastly different from time to time or place to place in terms of virtue.
Furthermore, since 1970, American workers have steadily increased their productivity while real wages have declined. Where is the difference going and why shouldn’t people expect to get a share of it?
This is some kind of revelation about the American character, how? Whatever our policy problems are now, it has nothing to do with “People in this place and time are spoiled brats and people in X place and Y time are better.”
What are the policy and resource problems before us and how should they be addressed? I don’t buy this “character flaw” crap, because, as I said before, people are the same.
Furthermore, the exporting of manufacturing jobs to cheap labor areas has arguably hurt the American standard of living.