As a real estate agent I am often asked “How’s the market?”, to which I always reply “Great”.  This depends on what market you are in, however, if you are willing to adapt to the cyclical nature of real estate the answer still applies. As most would imagine there are numerous reasons the market has shifted however you will find small towns throughout the U.S. where markets remain unaffected.  I was recently interviewed about my opinions regarding the causes of the housing crisis which I shared with a client who suggested I post them on my blog. After reading the interview I could see her point, this common question has a complex answer so I made my most eloquent attempt at answering.

  1. In the past 3 years how would you say the rise in foreclosures has affected your business, good or bad?

Good. Since I specialize in the REO market, the increased inventory has also increased my market and sales.

2.  Do you personally know people who have lost their homes to foreclosure?

Yes..

3.   If you answered YES to question 2, what are the reasons people are losing their homes to foreclosure?

Many people, myself included, got caught in an adjustable rate mortgage. Because it was so easy to purchase, many people never considered an almost immediate knee jerk effect in lending practices once the real estate bubble burst.  Some markets were experiencing double digit appreciation and homes were over appraised. Overnight, programs disappeared for self employed and stated borrowers. A lot of people were stuck in homes at over inflated prices and rising interest rates; and with the tightening up of credit guidelines, they were unable to refinance into fixed rates. Most incomes don’t rise at the same rate of the adjusted mortgage and an already volatile situation becomes unmanageable. Once buyers fall behind, it is very difficult to  dig yourself out of a hole. Mortgage fraud and abuse also played a minor role in the foreclosure epidemic.

4.  In your opinion what/who is to blame for the current condition of the housing market?

Everyone. No one entity is to blame. Banks were greedy in making loans to buyers who never should have qualified for them and the buyers whose need for instant gratification and living beyond their means caused them to bite off more than they could chew.

5.  In your opinion what should be done to ensure future homebuyers don’t lose their homes to foreclosure?

I believe that we as a people are uneducated in financial literacy. We want what we want when we want it and it effects everyone. We need to stop putting band aids on bullet wounds and take responsibility for where we are as a nation. We need to stop living beyond our means, start saving, and start teaching financial literacy to our children in middle and high school so that the cycle stops repeating itself and we can again be a debt free nation.