![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-871030-100x100.png\")
Minsky, that's why I think it's short-sighted for people to blame the people who are going under foreclosure. It's much more than just people being irresponsible, but of course commenters here tend to forget that.
1 replies
Minsky, that's why I think it's short-sighted for people to blame the people who are going under foreclosure. It's much more than just people being irresponsible, but of course commenters here tend to forget that.
(to clarify: blaming JUST the people who are going under foreclosure; of course there are those who just make horrible decisions.)
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-11023-100x100.png\")
The part that baffles me is that where I'm living now, rentals are perfectly affordable, but despite this crisis there are still a ton of little tiny houses, like two bedrooms each, on little tiny lots, all of them 20+ years old, all still selling for over $100k. Meanwhile, I'm renting a two-bedroom apartment with nearly the same square footage, and no maintenance costs, and free internet, for the same amount an *optimistic* mortgage on that house would run me. (I.e., realtor.com's assumption of 20% down and a far better rate than I'm sure I could really qualify for.)
Something about this market is still broken. It's no wonder people are still defaulting if even when the market is this low, I still couldn't buy a house in this city that I could actually afford, even though I have no trouble paying my rent and have better work than a lot of people do right now.
![\"user-pic\"](\"/css/images/default.gif\")
@Repique: It's entirely dependent on the area. If we were going to rent in the area where we bought, we'd be paying more money for half the space.
@Repique: Interest rates are too low. Of course if they were higher, you'd pay more in interest. Real estate is always a scam.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-291700-100x100.png\")
@Repique: Try living in my neighborhood where tiny two bedroom houses on tiny lots, all of them 20+ years old cost more like $1.1 million.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-3857-100x100.png\")
That does it. I'm officially loading up on food, booze, and ammo.
@Roy Hobbs: We just loaded up (no pun intended) on .38 special ammo. Not because \"Obama is gunna take my gunz\", but because there may be an impending implosion of basic services. And those with guns will win in Mad-Max land!
As a conservative American, my views on this probably aren't welcome.
@spoco:
If you got laid off suggests that a knee jerk reaction is a rational and appropriate response. How about if I have prudently saved for years in case I am laid off. Then would I be entitled to a different point of view?
@spoco: If you were a true conservative, you'd be blaming the banks that were too stupid to lend THEIR money to people who couldn't afford the mortgages.
Why is personal accoutability a one way street with you? Why is Joe the Plumber who's uneducated at fault for taking out a loan he couldn't afford, and not the bank that was educated yet nevertheless wrote the mortgage?
This disconect baffles me. Just look who had the power to say \"no.\" The banks did. Joe couldn't tried to get a loan and the bank could've said \"no, you can't afford it.\" The reverse is not true.
@stevejust: Joe could have actually done the math and realized he couldn't have afforded it. Personal responsibility is knowing about when to say \"no\" _and_ \"yes\".
And, yes, the bankers, investors, et al are all at fault, too. You're basically putting words in spoco's mouth to refute his argument, which isn't much of a refutation.
@spoco: Your views involve destroying America because \"it's not fair to give money to people who didn't earn it.\"
Guess what? It's WAY to late for that line of reasoning. Swallow your pride and save America.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-470935-100x100.png\")
If people still got 40 acres and a mule for military service, this would have never happened.
Change isnt always good.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-890779-100x100.png\")
I just want to know how I can make this benefit ME.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-449069-100x100.png\")
It's a good thing that Congress understands the needs of the poor struggling American and is taking swift action to prevent further depreciation of our job base and economical outlook.........Just kidding, they are voting themselves a pay raise...
That means 7 of 8 are not in foreclosure or past due.
This is completely foreseeable. Why? Virtually all of the government proposed or sponsored programs require the borrower to be at least 60 days delinquent.
Current on your mortgage but taking money from savings of a second job to pay it? Tough luck. We cant help you.
Quit paying for a couple of months? Hi. I'm from the government and I'm here to help (oh yeah, and to get some more, er, revenue from your neighbor).
It's called a moral hazard and the Government has created it in spades.
I'd suggest in this case it's closer to a perverse incentive than a moral hazard. The money is intended to help keep people financially afloat in their house, but the method of distribution gives people who are already afloat an incentive not to be.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-483565-100x100.png\")
@shepd: Theoretically, I can see that, but I suspect that the people who currently aren't in housing trouble aren't individuals likely to be enticed into it by such a comparatively modest incentive.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-6173-100x100.png\")
@Borax-Johnson: Moral hazard doesn't always work the way people think it works. For example, people with fire insurance tend to have FEWER fires, despite being fully indemnified against fire and bearing none of the risk of fire. Moral hazard tells us that people with fire insurance should have MORE fires -- substantially more fires -- because they bear no risk, but it turns out if you're uptight enough to have fire insurance, you're careful about fire.
Sometimes removal of risk is about being RESPONSIBLE and trying to create as low-risk an environment for oneself as possible.
I'm getting very tired of the Boy Who Cried Moral Hazard as a) nobody ever shows any understanding of the complexity of moral hazard issues when citing it and b) there's a HELL of a lot of moral hazard that GOT us here through deregulation and systems of perverse incentives, but THAT was okay because it was just the free market at work. Now that individuals are suffering from the environment created by those corporate interests, NOW everyone's bitching about creating moral hazards.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-16563-100x100.png\")
@Eyebrows McGee: Ahh, you like Suroweicki too, I take it?
His observation is an interesting one.
I'm into marketing, with an emphasis on the economy while I have friends/colleagues with interests skewed in the reverse. I liked his piece since it seemed to indicate the primacy of marketing over economics.
To wit, an economist would predict that the Economic Wo/Man would experience more fires, since rationally, s/he set in place a floor for the losses s/he'd face.
A marketer, conversely, would predict less fires, since the person who'd buy fire insurance would also be the type who'd share a cohort of other fire-preventing traits.
It was an interesting statistic since it seems to indicate the latter, which I pointed out to my Economics-steeped friends with sophomoric glee.
Totally agree with your points, but thought that I'd share the marketing vs economics side of it that I was enjoying with some friends.
@Trai_Dep: I'm only passingly familiar with Suroweicki, but yes. :) I mostly got interested in moral hazard because claims of moral hazard come up INCESSANTLY in insurance litigation ... because in theory, if we were all the economically perfect man, insurance would continually create insurmountable moral hazards and in theory we'd only insure people when we wanted to create an incentive for them to do something that would otherwise be economically dumb. But in practice it rarely works that way.
@Eyebrows McGee: Total agreement. It's a theorized effect that sometimes operates and sometimes doesn't, and it tends, I think, to be a sophisticated sounding way of resenting aid for which one isn't eligible. (Not that I don't get the wanting money thing myself--just that it doesn't translate into a faulty economic decision on the part of of the government not to give it to me.)
most impressive...
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-349596-100x100.png\")
I can't point fingers anymore. Too many people and situations came into play for our \"house of cards\" to fall. Some people say this downfall began in the 80's, 90's, some say when Bush hit the office. WHO CARES. It's a done deal, our country is in ruins.
RUINS, I SAY!!
*tear*
Any chance of forcibly tattooing \"1 of 8\" onto the foreheads of those smug economist types who blithely told us twelve months ago that the sub-prime crisis was nothing to worry about since it would be self-contained?
I've got the ink, if someone else has a dull, rusty needle.
@Trai_Dep: There were plenty of economist types who disagreed with the idea that sub-prime crisis was nothing to worry about.
Peter Schiff called it perfectly-
@IamNotToddDavis: Totally agree. Stiglitz and Krugman, among others, were voicing concerns about this for y-e-a-r-s.
Damn Pinkos.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-59988-100x100.png\")
I can't help but hear the announcer voice from Mortal Kombat games, saying,
\"IMPRESSIVE...\"
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-237394-100x100.png\")
@kwsventures - The glass is half full/half empty thing only makes sense if the contents of the glass are relatively unimportant.
I'm curious to find out their exact definition of houses in the foreclosure process. This probably doesn't account for those already taken over by the bank, refused by the bank (like in Cleveland, where the bank doesn't even want them), or just sitting vacant with no owner to be found. This 1/8 might be a statistic of the acceleration of the problem.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-307161-100x100.png\")
@Nakko (reply seems broken today) FATALITY. Recession wins! Flawless victory!
Chase gets my $1200 a month and they can't touch me. >:)
I, like many, didn't get a stupid mortgage that I couldn't pay. I don't have to beg for assitance. Those that are caught up in all of this deserve to be evicited so they learn that there are concequences to their idiotic decisions.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-738213-100x100.png\")
Come on now... I too have a $1000 fixed (at 5.5%) mortgage-- but if my wife or I lost either of our jobs, we'd be in trouble.
@JGKojak: That statement is true at any point in economic time. I was laid off more in the late 90s \"boom\" than any other time. I am still here to talk about it. And no, I didn't work in the dotcom industry.
Nope, I don't strathmeyer. The majority of those people were probably provided misinformation or were pressured to make a purchase they could not afford. I'm sure there are plenty of people who made mistakes, but it's not all their fault -- the lenders, banks, etc., made just as many (IF NOT MORE) mistakes.
A nation of whiners and \"what's in it for me\" citizens. Bleh. What would grandpa think if he were still alive?
@Onion_Volcano: My grandpa, the stockbroker who worked through the Depression, would be spitting tacks at the regulators and the institutions that exponentially expanded crap loans into a financial cornerstone.
@ Trai and Todd - Oh yeah, Peter Schiff did call it right. And by only ever calling on him to be harassed on TV, it made him look like a lone crazy man.
Forget tattooing, I want a blackjack with that embossed on it. Whenever I meet a mortgage broker, half-assed cheerleader economist or bond insurer I can just wack em in the head and leave the mark. Hell, add failed CEO, banker or any number of other contributing morons.
The positive side effect would be that they all have hideously boring jobs that they used to brag about. No more listening to that.
And also, strathmeyer, people are losing their jobs left and right, jobs that were probably stable before the recession. Like JGKojack, they can afford the mortgage now...but would be screwed if they were let go. And that is pretty common, and I wouldn't be surprised if a lot of the 1 in 8 people lost their jobs and are now left dangling.
I think people in this country rely way too much on owning a home. It's like they think it will make them a better person. What's so wrong with renting? At least I'll never be left homeless. Plus I'm single, so it just makes sense. Maybe one day if I'm partnered up, but right now I like the fact that my management takes care of any problems I have (I don't have to pay for the broken a/c!), and it's easy for me to move at will, especially since my future with the company I am with now may not be permanent.
Anyway, long comment is long!
@nakedscience: And before someone says \"Blame the OP - emergency fund OMGZ!!1!\" - riddle me this, Batman - what happens if the emergency fund runs out?
@nakedscience: What's wrong with renting is that it gives you less control over your life. When you own your house you can get cats and dogs without seeking anyone else's permission. You have more control over what amenities your house has--if you want to change from electric stove to gas, or from carpet to wood floor, or you want to plant a tree or build shelves into your closet, you can do it without negotiating permission and without your purchase immediately becoming another person's property. Because people invest more in places they live in than in rental property, you'll tend to find better amenities in places being sold than in being rented to begin with. You also don't have to worry that at any time you'll have to find a new place, pack up and move with only 30 days' notice (in California most leases wind up being month-to-month).
@u1itn0w2day: Obviously if this guy is newsworthy, he is an exception. Real estate bubble prices were too high for 10 out of 10 Americans. That 800k house probably cost 100k to build.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-436259-100x100.png\")
@nakedscience: i think the thing about owning a home is that it gives you a sense of stability, security and achievement. And from what i read, it gives you better insurance rates and [pre recession] would have made the creditors view you more favorably.
@Lucifer_Cat: Not that any of those are good reasons to buy a house you arent prepared for yet, financially or otherwise.
I find this really hard to beleive. I don't know anyone who has lost their job or is in foreclosure, or at risk for foreclosure, and I know a few more than 8 people...
@ConroyCotta: Personal experience doesn't reflect averages, though. I'm guessing, for instance, that you're not in California, Florida, or Arizona, or Ohio or Michigan, so the rate of people affected will be considerably lower in your area, while people in those areas may well know a considerably higher number of people affected.
You might find it interesting, though, to pop in your zip code at a foreclosure listing like realtytrac.com and see how many homes they have that you didn't realize were in foreclosure.
Yes, Jenkinsbball , because everyone defaulting has obviously made bad decisions and of course no one is getting laid off in droves ... nope, it's all their fault, they are all stupid...
Sigh. This is what I'm talking about. The lenders and bankes, etc., have made JUST AS MANY IF NOT MORE mistakes.
I got a delinquint tax notice from the County, which puzzled me since Chase is supposed to pay property taxes. Well-- turns out, after talking to a lot of idiots at Chase, that Chase had been paying taxes on the wrong property (type-o in their computer system).
I got it fixed eventually- but here I was a delinquint taxpayer and there was NOTHING I could do to change that until I received notice.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-76955-100x100.png\")
Yeah, how many homes in the US have mortgages?
@SadSam: Figures I found varied, but it was mostly around 70% (obviously the rest are mostly renting rather than paid off).
@floraposte: Ok so does that mean that more than 70% of americans have their own homes? [As compared to people who rent.]
I was wondering about it WRT some other post, but I cant really research it till later.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-851357-100x100.png\")
What's wrong with having forclosures? Owning a home is not a RIGHT. I waited until my mid thirties before I could afford a home and now I am asked to pay for those that couldn't wait. There's going to be a painful readjustment to get things back on track. Not everyone can win; that's just the way it is.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-1041-100x100.png\")
I find the 1 in 8 statistic truly shocking.
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-605132-100x100.png\")
@strathmeyer: How can you call people irresponsible who lost their jobs through no fault of their own. They can't find new jobs because no one is hiring and they can't afford their mortgages because their income was cut in half. They can't sell their homes because no one is buying, a buyer can't get financing, or their home is worth less than they owe. Please explain to me how those people are irresponsible?
I agree that there are some instances of predatory lending out there (sad stories recently highlighted on the Consumerist come to mind) but my guess is that a vast majority of these foreclosures have some amount of greed involved. People bought more house than they could afford and now its caught up with them.
The problem with all of these bailouts and such is that it is teaching generations that there are not consequences for stupid actions. Hell, we have little leagues here that don't have winners and losers because someone might get their feelings hurt. School districts are dropping traditional grading methods so that kids don't fail. Now we as taxpayers are bailing out companies that have made horrible decisions, and homeowners that were greedy and took out more than they knew they could handle.
Guess what, America - there are failures in life. I've failed numerous times. The difference is that I have used my failures as learning opportunities rather than kicking back and expecting my bailout.
Let these foreclosures happen. It will make most of the \"victims\" better in the end. Let these companies fail, it will create a new breed of businessperson that is focused on doing things different. Since we've bailed them out, it is only fair to expect more of the same. And now we are creating an additional generation that is learning that they can get something for nothing.
We could have also called this article, \"7 of 8 Homeowners current in Mortgage Payments\". The 88% of us he never missed a payment, bought houses we could afford and didn't want a status symbol to live in will pay for the 12% that broke the rules.
Admittedly, in that 12% there are some who ended up there through no fault of their own. Still, some of us believe that we should bear the consequences of our choices and not wait to be rescued by a welfare program.
@spoco: I doubt being homeless will make people \"better in the end\"
Comment reply function is broke, so I can't tag onto ConroyCotta and tell him/her to do a little reading of national news media on the Web.
We live in a state (RI) where unemployment is now 10.3% -- 2nd only to Michigan and its collapsed auto industry -- and the forecast is for that number to increase this coming year. EVERYONE here knows at least one person, and more likely a good many people, who has lost a job that is never coming back. And it cuts across all socioeconomic categories: blue collar (manufacturing has left for good), educated/professional (my husband with his decades of senior management experience and Ph.D. has been out of work for almost two years and is now looking as far away as Florida), service economy (retail and tourism have dried up in a state very dependent on their taxes for income). Now even government workers are losing their jobs in droves.
I'm so happy for you that you are somehow insulated from this catastrophe, but do know that it is REAL. Good people who have done the \"right\" things all their lives (gotten educations, worked, lived modestly, have retirement savings funds) are now hurting, losing homes, losing their pensions, going without health insurance, and beginning to show up at soup kitchens.
This is a Depression with a capital D where I live.
@ElizabethD: You do not think my 401k has tanked? Don't even get me started. I have tripled my savings lately because its like I can buy stocks and mutual funds on sale. I am throwing $2500/month into savings. You can't beat the deals out there now.
Yep, I have friends who both lost their jobs after buying their house, and they've been unable to find anything half as good since. No surprise that they can't pay for it anymore -- or, rather, that all their other bills are headed for collections because they're struggling to keep the house. I hope they can get their loan modified.
As for us, we have a $500/month mortgage and we'd still be screwed if my husband lost his job -- once the unemployment and the savings ran out, obviously, but in Michigan there's no guarantee you'll find employment of any kind before that happens. So I'm not exactly surprised to find that a lot of people are having trouble, nor am I about to blame them all for buying too much house or opting for bad loans. If you can't get a job, you will run out of money sooner or later, no matter how well you've prepared.
@spoco:
I suppose demographics can cause different people to find themselves in vastly differing situations in this recession/depression. It's great, honestly, that you have $2500 a month to put into savings and/or investments. We at present are taking money *out* of our dwindling savings each month for some of the reasons that CumaeanSibyl mentions in her comment above.
My husband is 63 and I am 57. We have two children in college and one finishing high school. Yes, the unemployment insurance runs out. Since our income (solely from my job) is now less than half of what it was when husband was employed, and our expenses (college, gas, groceries etc.) have increased, we are in quite a pickle. No crazy wild spending here, not since we had kids, now ages 18-23.
If we were 20 years younger and weren't bleeding our savings to stay afloat and pay tuitions (the financial aid authority told us we \"can\" afford $18K per year for our daughter's tuition, which is laughable), I might be as sanguine and opportunistic as you. But right now, I am simply perplexed as to how this will all end, and discouraged as to our impending quality of life and my children's futures. Saying to me \"you can't beat the deals out there now\" is irrelevant to what I posted and pretty much rubbing my nose in our misfortune. So, thanks for your perspective.
Except for the pesky 'facts' that's totally the case! The large majority of federal programs are not available to homeowners who have missed payments.
Intentionally miss a payment, you're out of the running for the just-announced $75B \"Home Affordable Finance\" program. Ditto the FHA's program.
It couldn't be the economy? No, \"the economy is fundamentally sound.\"
@Lucifer_Cat, @florapost, and everyone else regarding the percentages.
The article is kinda comparing apples to oranges. According to the article, 11.1% of mortgages are delinquent. Some of those may be for second homes, rental properties, etc., but some definitely are for owners' homes. As pointed out, not every homeowner has a mortgage - only about 70% do, with 30% owned free and clear, according to this census.gov site.
So worst case, 70% of 11.1% ( or 7.77%, roughly 1 in 13) of all owners' homes are delinquent.
Relatedly, not everyone owns, some rent. Lately, the % owning has risen significantly to a high of 68% according to the census bureau.
Statistics aside, the point is - this is tons more than it has been!
@rhombopteryx: Thanks for finding the census stuff--I was wondering how many homeowners didn't have mortgages, and it's a considerably higher percentage than I would have guessed. So I'm ending up with a 5.3% figure for U.S. households in mortgage trouble, , which puts it closer to 1 in 20 households, which is a fairly significant difference from 1 in 8.
I'm not remotely disagreeing with you about its being a record high and a big problem, but I think that the mis-math that produced the 1 in 8 figure is the kind of thing that drives some posters' puzzlement that they don't seem to know any of these folks. I think it's worth getting the stuff as right as we can in describing the problem; otherwise it'll just be that much harder to fix.
I saw a report on CNN I believe about a bus driver who bought and 800K house which is now worth only 625K .Wait a minute ,800K house for an hourly worker .How can any in the loan chain justify that without lying .How the heck the bus driver even think they are entitled to consider a house like that .WTF
Let's forget the mortgage for second .Another consideration one must or should consider when buying a house is that can you actually afford to live there .Ok you got financing for the house but about heating or cooling an 800K house .How about maintainig a swimming pool in Calif or Fla .As an example I've read where several Extreme MakeOver Home Edition participants can't afford their newly built houses .
Wether it be taxes or utilities they simply can't afford even they almost got if for free .These are some of the questions that should've been asked and brought up by the news people .
I get the ripple effect but the ripples started with the buyers and loaners and that is who you have to make an example of .
orlo \" ... bubble prices too high for 10 out of 10 Americans. \"
And that's the whole problem in a nutshell .How does an economy based on instant gratification and keeping up with the Joneses compensate for inflation,low/poor pay,over pricing,gouging etc -credit .
Artifical economy ,artifical statistics that will go even higer or go lower .
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-86807-100x100.png\")
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-157517-100x100.png\")
That's an absolutely staggering statistic!
@minsky: It's also misstated in this headline. It's not 1 in 8 households, it's 1 in 8 mortgage holders/homeowners. So it's more like 1 in 12 households.