Was the current housing crisis created by amateur real estate investors ?
If you follow the foreclosure trail in Nevada , California and Florida it seems people may have purchased homes on margin at the peak price because they thought the home values were going to double again .
Some people stopped renting and jumped into the real estate market at the peak , but why were they willing to pay double or triple than they were paying in rent ? Did they all of a sudden lose there jobs or is it they just don’t want to pay a 0,000 mortgage on a 0,000 house and decided to go back to renting ?
These scenarios seem to point to a form of Amateur investing rather than buying a place to raise a family .
Or , is the crisis mostly single mothers who will be evicted on Christmas Eve because they are a nickel short on their final payment ?
3 Responses
agoodquestion
09 Feb 2010
a_wood80
09 Feb 2010
No, it was caused by the government forcing banks to give loans that they normally would not have given, based on credit histories.
googie
09 Feb 2010
See the type of answer you get about the government having forced the banks to give loans ? Not that the oversight committees headed by Senator Dodd and Bernie Franks fell asleep on their jobs, and never questioned the types of loans, not that their committees ever looked at the sub prime rates or the type of mortgage contracts being written or the oversight of Freddie Mac and Fannie Mae which guaranteed over 50% of the mortgages written .
I live in Nevada. Homes were selling here sight unseen to "investors" looking to get rich. Mostly people from California thinking our market would go up as theirs had. It was just crazy. Homes were going up in value each day, everyone was trying to get in on it. As the home values were going up and interest rates were so low the mortgage companies were just giving out the loans to anyone that could sign their name. I don’t feel that the mortgage companies were forced to do anything. I think the people and banks just wanted to all get in on the free money to be made in real estate. Now that the bubble burst and everyone is going under, everyone is looking for somone to blame. I don’t think any pokitical party is to blame, I just think people are greedy and not always very bright.