Whether or not you believe that housing has hit bottom, there are some things to be learned from the recent fiasco that was the housing market. Greed is an ugly business, a vice to be eradicated, especially in the markets.
For example, many buyers knew, in their heart of hearts, that the beautiful new home they were buying was just a bit above what they could really afford, but hey – the lender says yes, so why not? I’ll tell you “why not”. “Life” happens – people get sick or disabled, lose their jobs, divorce, etc. and buying above your means (and for zero down…really?) limits your options.
Buyers were not the only guilty parties – lenders and brokers can certainly claim their share of the blame. What seems too good to be true very often is – a fact that’s easy to ignore when the money’s flowing all around, home values are rising and all looks rosy on the horizon.
Now don’t stop reading right here and say that I’m blaming all buyers or brokers, I’m speaking in generalities, of course, and I do realize that there were other factors at play, I’m just discussing a part of the problem.
So now that we’ve been collectively “punished”, what are we to take away from all of this? NAR Immediate Past President Ron Phipps recently wrote about 10 lessons we can learn from the housing market crash:
- The economy cannot recover without housing.
- Everyone needs shelter, but not everyone needs to own their shelter.
- High homeownership rates are important but they must be sustainable.
- Home prices go up and go DOWN.
- The process of purchasing /financing a home is more complicated.
- Sound underwriting of mortgages is critical.
- Home equity should not be used for ordinary living expenses.
- Financial reserves for family, companies, and countries are necessary.
- Homeowners confidence in the economy is directly related the value of their own homes.
- The economy is global.
I would also like to add the fact that basic finance should be made part of every school’s curriculum. Buyers who understand what it takes to buy and manage a home should be informed enough to avoid making financial decisions that will negatively impact their lives.
What other things do you believe we can take away from these past few years? Do you believe we’re still in a slump, or does it appear to you that recovery is within sight? Please share what you think!