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From what I just read, the number of forclosures increased last year by 75%...which is huge. Also, the article said there is "no sign of slowing" which is tragic, but I keep wondering: aren't the pushy real estate agents and loan officers at least partly to blame for getting people into a loan they couldn't afford?
And shouldn't interest rates start going UP, before the US dollar is worth as much as a piece of toilet paper?
Its called greed. With the dream of being able to own their own home many people were seduced into buying houses they couldn't afford. Banks planned on making a killing on homeowners who would later get hit with high interest rates when the initial interest rate on their ARM ended. The sub-prime lenders assumed that a certain percentage of these homeowners would defaut but they figured they would make so much on the rest that they'd still make a lot of money. When the the economy and employment tanked a lot more people defaulted than they were counting on.
Of course with the current administration that considers greed a virtue I'm sure that these institutions will be bailed out after making risky loans and the poor smucks trying to buy into the American dream will be vilified.
I'm in the process of buying and selling a home at the moment (yeah I know, hard to believe I ever have time to come on funadvice; hey I have my priorities!).
My real estate agent cautions all her clients not to get into a situation where they are "house poor." If you buy a house that uses so much of your income that you have to cut corners elsewhere you are house poor. Realtors with fewer scruples only see selling people up to a more expensive home as a way to make more money.
One rule of thumb is not to buy a house that costs more than 2.5 times your current salary. Many people with good credit qualify for loans 5 times their salary. In most markets someone who makes less than $40K simply can't buy any house without ending up house poor.
From an article in the New York times: "Last week, the National Association of Realtors reported that sales of previously owned single-family homes, a large portion of the overall housing market, suffered their biggest annual drop in 25 years. And the median price of those homes fell for the first time in at least four decades, and possibly since the Great Depression."
Wow. I guess this explains those amazing profits all the banks were making the last few years...sad, though, that so many people are going to be suffering for their greed.
No I don't think its the real estate agents faults =O
