Real Estate Bubble go boom.posted by The Vidiot @ 7:56 AM Permalink Anecdotal: Not too long ago, Mr. Vidiot and I were wandering around Brooklyn looking for an apartment, wondering if we could afford to buy anything that even resembled a home. We were in Bed Stuy and though the neighborhood has a spotty reputation, there were parts of it that were being gentrified, which meant that the parts of it that hadn't been gentrified yet were still affordable... sorta. We had just looked at an apartment that was brand new. The couple was showing the top floor and second floor. They lived on the first two floors. What was odd was that they showed us their apartment as well. They said that they were considering renting it out and moving to one of the smaller apartments because they could get more money for the duplex. The woman was visibly nervous about that possibility. She looked like she did NOT want to give up her brand new home that was probably the nicest place she had ever lived.
Anyway, we were looking around and we found this one real estate office and walked in, just for kicks. They sat us down and said, "Sure. We've got lots of nice new construction out here. They have an owner's duplex with one or two rentals and they go for about $500,000."
"$500,000," we said. "Why, we could never afford something that pricey."
And without missing a beat, the smarmy real estate guy said, "Oh, sure you can. We just put a family in one last month. They only make $35K a year. We have a way to work the financing."
Ways to work the financing.
And this, people, is what happened everywhere. Some smarmy real estate guy talked some poor saps into buying a home they shouldn't buy. And now it's news that this is happening to million dollar homes.
Excerpt:"Because of the financing that was possible, so many people bought the bigger house, the million-dollar house with the bowling alley or the tennis court outside," says Guzek, who works for GreenPath Debt Solutions, a nonprofit service based in Farmington Hills, Michigan. "People across all income brackets are having financial hardship."Of course it's happening to million dollar homes. That's what homes cost in an inflated market. And there's no end in sight either.
Excerpt:Bay State mortgage foreclosures have hit a record high for the second straight month, and a top market watcher warns problems will “continue at astronomical levels well into 2007.”Who do I blame?
Top on my list is the media. Yes, the media. Now, I know, I blame the media for a lot of stuff, but hear me out: If it weren't for the media, and by media, I don't just mean the obvious, like the "news" programs that constantly pump out "economic good times" propaganda. I'm also talking about the commercials, the advertising and the programming of everything, from The Gilmore Girls to the OC. What do you see when you watch the commercials and the programs? You see beautiful, big houses with lots and lots of stuff in them. You see happy people with money. You see sad people if they look like they don't have money. You see it in ads for dishwashing soap. You see it in TV shows about angst-laden teenagers who should be riddled with Chlamydia but aren't. It's everywhere. If it weren't for this constant presentation of an impossible-to-acquire "reality", would we all even think of wanting the big house with the cooking island and the half bath in the guest room? I doubt it.
Next on the list are the smarmy real estate people who sold these properties to people, knowing full well that when the mortgage ballooned, the buyer would be screwed. Then, next on the list, the bankers who actually made the loans, knowing that no matter what, they'd be selling the debt to someone else (Freddie Mac) and it wouldn't be their problem in the long run.
There are various and other sundry miscreants who played a role in this nightmare. Greenspan for instance, for keeping the interest rates down too long because the "powers that be" needed a bubble to prop up whatever else was going on with the US economy. (Iraq, hint hint)
I feel so bad for all those people who finally got into their dream home only to find that a few years down the road, they're either looking at foreclosure or negative equity or both.
Capitalism. We HAVE to find a better way people.