Many issues compete for our attention in the wake of the housing bust. In the sidebar of the blog is a list of topics of interest I write about frequently. However, the importance of these issues is not equal. Underlying most of them is the central problem of the housing bust: moral hazard. Every decision we make in life has consequences. If we save regularly and invest wisely, the consequences are wealth and peace of mind. If we spend foolishly [Read More...]
I found a new hero online: Steven Greenhut, vice president of journalism at the Franklin Center for Government and Public Integrity. As a fellow displaced Midwesterner, he was shocked and appalled at what he witnessed moving to California. He too is buying up rental homes in beaten down markets for the cashflow. He recently wrote an editorial on Bloomberg that is today’s featured article. Mortgage Deal Props Up California House of Cards: Steven Greenhut By Steven Greenhut Feb 9, 2012 [Read More...]
Money won't buy happiness, but it can provide the finest forms of misery. Everyone wants money. If given the chance to do nothing and obtain money, most people would take it. Such was the lure of the housing bubble. People only had to do two things to obtain copious amounts of cash. First, they needed to buy a house. Then they needed to find a lender who would give them money for signing some paperwork. That's it. No work, no [Read More...]
The banks blew it. We all know that, and now we are all being asked to pay the bills for their catastrophic mistakes. I didn’t cast the first stone, but I hope my writing about this issue has left a lasting impression. I also hope we can all learn something from this are avoid the mistakes again in the future. I have my doubts. We can all see the problem and the solution, but we all know the government is [Read More...]
Did anyone who participated in the Great Housing Bubble stop to consider what was the right thing to do? As long as the money flowed in a river to homeowner’s doors, few cared. The river of free money isn’t flowing any more, and now we have to examine why this happened, or we risk doing it again. In yesterday’s post on Walking Away from a Mortgage to Secure Their Children’s Future, I presented the argument that people should walk away from [Read More...]
Have you ever stopped to ponder the issue of moral hazard? At its most basic, moral hazard is any change in behavior that comes about when people believe their actions have no consequences. The housing bubble was built on moral hazard. None of the parties to the real estate transaction believed they had any risk. Borrowers and lenders both believed real estate always goes up, so there was no market risk. Some savvy borrowers realized that 100% financing was transferring [Read More...]
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