the problem in the housing market

24 04 2008

I heard on the news that 1 in 7 mortgage owners are worried that they won’t be able to make a monthly house payment in the next 6 months.  The newscaster said this illustrates the pessimism in the housing market.  That may be true, but to me it also illustrates that many people aren’t managing their finances well.

I realize that many first-time homebuyers may not already understand things like subprime loans and ARMs (Adjustable Rate Mortgages) and escrow, but if you’re going to agree to pay on a house for 30 years, you should be sure you understand the terms and then count the cost to be sure you can actually afford it.

And ideally, you wouldn’t live month-to-month because you’re spending all that you’re making.  I know, some people don’t make as much as others.  But nonetheless, we should all aim to spend less than we bring in.  It’s so dangerous to live month-to-month, because then you’re in big trouble if your car breaks down or if you lose your job.  Such things do happen…  (I definitely know about this, because last year I lost my job due to the economy, and this week my truck needed repairs.)

I’m not trying to sound like I don’t care, but I don’t think it’s the government’s job to bail out people who got in over their heads because they made bad decisions.  People need to take personal responsibility for what they do.  But if there are cases where lenders were fraudulent, that’s different.  Legal action should be taken in those cases to protect consumers.  But I doubt that millions of homeowners have been taken advantage of in the past few years.

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