Is the “Housing Crisis” as bad as some make it out to be?

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Is seems to me that maybe some people bought more house than they could afford? Whose fault is that? Mine? The governments? Or the perosn that put their signature on the mortgae and loan documenst?

Here is a graph from the Mortgage Bankers Association:

What is pretty obvious is that subprime mortgages in general are not the problem, but subprime ARMs that are the real problem. Subprime fixed foreclosures in 2007-Q3 were actually below the last peak in 2003-Q4, and still aren’t much higher than FHA foreclosures. Foreclosures on prime fixed-rate mortgages haven’t moved much at all in the last 5 years.

Fortunately, subprime ARMs make up only 7% of the total mortgage loans outstanding according to the MBA, or about one out of every 14 loans, and of those subprime ARM loans outstanding, about 1 out 20 were in foreclosure in 2007-Q3, or about 1/3 of 1% of all mortgages.
So, because people with horrible credit – who can’t responsibly use a credit card let alone manage a piece of real estate – are being foreclosed on, my tax dollars should help bail them out? Give me a break. The lenders and the home owners need to accept the responibilty for the losses they must now incur.

More importantly, an unnatural housing bubble is being corrected.
30-Year Mortgage Rates Fall Close to A 4-Year Low – St. Louis Fed

  1. Reply
    February 6, 2011 at 11:32 pm

    The main problem is appraised values.
    Because the market is so down, peoples houses are worth much less than they should be, and this throws off their mortgage rates.

  2. Reply
    February 7, 2011 at 12:25 am

    It is in the state of Nevada.

  3. Reply
    Jeff M
    February 7, 2011 at 1:15 am

    Depoends if you want to buy or sell.

    If you want to buy a better home, now is the time to do it.

    If you want to sell your home for a prifit, now is a terrible time to do it.

  4. Reply
    February 7, 2011 at 1:35 am

    I agree with you 100%…why should I work hard to pay for my house…then pay my taxes so someone else can have the government pay for their house????

    Furthermore…those people that are complaining about living in a FEMA trailor with bad fumes….well…get your lazy a** out of there and get your own house. We have people everyday in the USA loosing their homes to fires or tornados….they pick up what’s left and start over….the same needs to happen to the Katrina & Rita victims. Get a job and take care of yourself…STOP all this government waste.

  5. Reply
    February 7, 2011 at 1:54 am

    The FBI is looking into possible criminal activities now. I think that’s better than bailing anyone out.

    Your question is “is it that bad.” Well, yes and no. With real estate, the old saying that the three most important elements are “location, location, and location.” With the crisis, it’s also location. Some sections of the country are just fine. My house has appreciated nearly 20K in the past year. My neighbor just sold her house to retire to a less expensive community. Her house is more upscale, and they had a huge appreciation. We are also in an economic boom right now. Two years from now, things might not be so sunny here.

    There are markets, however, where 3 out of 4 houses on the market are actually in foreclosure or about to go into foreclosure. That’s pretty bad by anyone’s measure. However, it isn’t as simple as just bad credit risks being extended credit, although that’s part of it. It was also people who were otherwise good risks trying to flip houses by putting a little bit down and buying more than one house. I read about a 52 year old woman who invested her entire savings in houses, buying 5. Then the over-inflated housing bubble burst, and not only could she not flip the houses, but she couldn’t even sell them for what she needed to get out. She lost every penny she had, declared bankruptcy, and walked away from the houses.

    She and the banks that extended credit to her should NOT be bailed out. She knew what she was signing when she signed. They knew what they were having her sign.

    I think we should apply a little tough love to this crowd.

    We are interested in some stocks that hold real estate income properties – things like Comfort Inns. The purchas price of the stocks have been falling, and all anyone can figure is because they have “real estate” in part of the description. For us, it’s a great time to pick up some bargains, because the stocks are really sound, and not at all affected by any of the sub-prime nonsense.

  6. Reply
    robert h
    February 7, 2011 at 2:40 am

    let me just put it this way without any long account of the mess that this country is in let alone the rest of the world financially. i do know something about money. i am no expert. about 5 years ago i was half doing something and half watching television. i heard the phrase subprime mortgage come through my tv set for the first time. i looked up and said something is wrong here. now if i figured that out about 5 years ago why the hell did not all these regulators figure it out.

  7. Reply
    February 7, 2011 at 3:17 am

    All mortgage loans are not created equal. If you are looking for a loan, you have probably discovered the array of loan types and options. It can be confusing forthe first-time borrowerand are easier to qualify for than conventional loans. They are also guaranteed to the lender, which allows the borrower to obtain more favorable loan terms.

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