People are Miserable because of Job Loss and Housing Market Bust
Posted by Foreclosure Prevention in FinanceWhile the housing bust and tough economy has hit certain states harder than others, everyone is dealing with the hardships brought about by mistakes people made either by accident or on purpose. For a period of a few years, everything was going well with the economy and things were growing fast and big. People used this to their advantage by buying homes, buying second homes, and jumping into the market to flip homes. They intended to buy something run down and cheap, fix it up, and sell it quickly at a profit. This worked temporarily and made some skillful people a lot of money. The trend appealed to many and less savvy business people decided to give it a shot. Around the same time it hit its peak in popularity, the housing market began to crash. Houses stopped selling, people began losing their jobs, and suddenly many people were left with homes they could not afford. Your modest Texas Home Loan may have ballooned into something with unreasonable monthly payments or your Houston mortgageinvestment on a second house you were intending to flip stuck around far longer than you intended, draining your savings. What was the cause of this devastating crash?
Experts agree it was mostly a combination of factors, some of them honest mistakes and others malicious actions by lenders and crooks. In some cases, banks saw a chance to make a lot of money from the market boom. They convinced people they could afford unafforable monthly payments. This was a possibility because payments would balloon over time. A person could purchase their home with an affordable mortgage during the first two or three years, but once that introductorty period ended, the rate rose and left them desperate. They may have originally been promised the ability to refinance prior to the rate hike but that never happened. These people were taken advantage of, but they were also foolish enough to trust the lender without due diligence.
Much of the housing boom was fueled by government encouraging lenders to fund loans for people who were high risk. Banks were required to meet lending quotas regardless of risk. Many people were able to get mortgages regardless of their credit and income. When the market began to fail, the strain homeowners like this put on the market became even greater. A part of the economy that had just been rolling along at a breakneck pace was suddenly its biggest strain and people were abandoning their homes in droves, not able to afford their payments. While not agreeing on specific causes, most will agree irresponsible behavior played a major role.
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