The Daily Priapism

I am not a real estate writer, I just play one online. Here is my understanding of why it will be this way until there is a more responsible response from the feds.

The problems we are experiencing now are older than a toddler.

Often when looking at these issues from outside we only see the immediate issues. But this current down turn in the housing market, a turn that is having lasting effects on the economy altogether, is a result of years of turmoil and bad decisions.

In 1999, the same year I graduated from high school, the tech world was climaxing and later bursting from what was a short lived high. The bubble that was burst caused many stock traders to move to a new market, real estate. This caused a change in the real estate that is still biting new buyers in the ass; outside speculation and interest in the market increased demand and at the same time prices for houses. This meant that homes began to rise in cost, but not necessarily value, as the cost of these homes rose at a varied rate from the actual market value, something that no one expected happened, the September 11th attacks.

After September 11th 2001, the market was shot. To boost the economy, and the perception of the American attitude, rates were lowered on homes, cars, and general borrowing. As this began, the market picked back up, with the same issues existing, greedy investors, overpriced homes, and inexperienced borrowers. As borrowing began to dry up, further stimulation was encouraged; once rates were as low as 1% for home loans, the only additional way to stimulate borrowing was to increase the number of borrowers. Even if it meant that we were risking ARMs and legs!

With the market running so well in 2002 and 2003 hundreds of companies began to seek out methods to suck every dime out of this moment in time. Predatory lenders began using low introductory rates as a "song of siren " to newcomer borrowers eager to own a piece of the American dream. With these adjustable rate mortgages and interest only loans, borrowers were experiencing more house than they could afford, at a rate that was too good to be true. This cause over borrowing; when people who didn't understand the pitfalls got into these homes, buying a new car at crazy low rates was simple too. This created a terrible snowball effect.

As these folks move on they learn that renegotiating loans is easier when you are already living within your means. Some people even borrowed more money or began using the little equity in the homes they purchased. The result is what we see now; the first of the 5 year ARM balloon payments are just now hitting. Think about it, its 2007 now, subtract 5 years, and you are right in the beginning stages of this crazed real estate market. As the coming years progress the real estate market will adjust, but the feds are looking at ways to solve a problem that started years ago. With all of this said, most economist would think that this will all work itself out; this is true but what does that mean to the thousands of families that can no longer afford the matured loans they once looked at as affordable.

These are my views, my guesses you could say, that doesn't mean its right.

• Keywords:
• economics
 
• opinion