This article goes into depth about the foreclosure crisis and the different zip codes that it has affected. It was very interesting to see how the landscape has changed in the past 5 years. 5 years ago it was cities such as Detroit, Cleveland, and Indianapolis which economies relied heavily on the auto industry. "These days, however, many of the worst hit zip codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix, San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess." The article also goes on to talk about the drop in prices of homes. Today, it seems as if once you buy a house, you are trapped in the house unless you want to take a big loss on it. How can people expect to live like this?
I think the fact that these foreclosures are happening in communities that are only a decade or two old show that some people's irresponsible decision to buy are catching up with them. If you can't afford to pay the mortgage when you buy a home, reconsider before buying.
ReplyDeleteIt's not just ignorant sounding decisions that caused this mess. The creditors intentionally strategized frauds to take advantage of the people who thought that the housing bubble would last longer than the what they had imagined. Many mortgage price fluctuated as the house increase in value. So the borrowers were screwed to keep on paying the mortgage until they went bankrupt. Then they'd borrow from banks only saw this situation as a profitable opportunity. The banks, and othehr creditors, would take everything away from the borrower and went to the next customer. Foreclosure was systemized to benefit the creditors. I guess people were too busy counting up their money that they didn't have the time to think of the effect it had on the economy. Or to say "hey, we shouldn't lie to get money." Reminds me of issues in urban economics.
ReplyDeleteAndy made a great point, once you buy a house you are trapped unless your willing to suffer a big loss. People who have a steady a job are trapped because I dont think the average person can afford a loss the housing market recession would make them endure. But what about the people who lose there job and invested in home that they can no longer afford. These people are no longer just out of a job, but their homes are being foreclosed and they have lost a significant investment. It is a tough situation, and I dont think anyone expected the housing market to stay so low.
ReplyDeleteI think Alex brings up a great point. My cousin recently purchased a home in New Orleans, but is unable to pay the mortgage. He had find roommates to rent from him in order to stay in the house. However, his neighbors are upset because he lives in a neighborhood with a covenant against mutliple family homes. He is now being sued by his neighbors. He made a mistake by buying this home.
ReplyDeleteI get the impression that many people trying to "move out west" are doing so prematurely. It may not even be the result of inadequate savings, but rather an unstable job market. After losing their source of income, a new family already living frugally puts themselves in too deep of a hole financially, resulting in foreclosure. But that may be the risk of moving from the Detroits and Clevelands of the midwest into the west...
ReplyDeleteMy cousins are in a bad housing situation that this article makes me think of. They moved to Ohio for jobs and bought a house there. Now they have a baby and want to move back to Michigan but are forced to live with their parents/in laws because they can't sell their house, unless it is for a huge loss. They can't buy a new house until they sell their old house, so they are definitely in a less than ideal position. The housing market bubble that burst in 2008 has put many Americans in similar situations and the housing market is not the once "safe" market it used to be believed to be when buying a house was always a smart investment.
ReplyDeleteColleen, that reminds me of my family when we live in Saginaw. Ended up being able to sell the house and move up to Traverse City.
ReplyDeleteI think a lot of this can be avoided if people would just wait a little longer before they purchase a home and have some money saved up first so they wont have such a large mortgage. I think the problem comes from this sense of entitlement to the American Dream people have. Buying a home is a big step and people living in America see it has part of the American Dream (big yard, white picket fence)so they might be more impatient when it comes to the purchasing of a house. Get some money saved up, find a house you can afford even if its not "perfect", and I think you wont be seeing a lot of this stuff happening.
ReplyDeleteGood point, Mike. I think people should cut back on the Mega houses and live within their means
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