When I was 20, I went into an electronics store with my husband. We wanted to buy a VCR. It was 1990, and back then, a Hi-Fi VCR cost about $800.00. We had the money in the bank. We were both employed. I was a college graduate, but had only been at my job for less than one year. Michael had been at his for two. We wanted to use the one year - same as cash deal.
We couldn’t get approved.
It was demoralizing. I wound up writing a check instead. That was my humble introduction to credit. I have an unusual respect, distaste for, and fear of it.
Fast forward to 2008. No job. No problem. You could qualify for just about anything. People allow banks to tell them what they can afford. News flash: They wanted to sell those loans. It was a once in a life time deal.
President Bush gave us a lesson tonight. At a 4th grade level. President Bush: Yoo hoo? We are not idiots.
“The number of new houses exceeded the people willing to buy. With supply exceeding demand, housing fell. This created a problem.”
That statement is startling and profound. Without your explanation President Bush, I may not have ever understood that complex concept. I thank you.
This has been the subject of much discussion in our house for the last five years. It’s a bit surreal to see it finally playing out. What will happen next however, is anyone’s guess.
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I’m firmly of the opinion that those of us who choose NOT to panic will wind up coming out of it okay. In our case, it doesn’t hurt that our financial picture is looking quite a bit rosier than it did, say, six months ago.
At any rate, a free market will correct itself over time, and the housing bubble bursting is just proof of that, IMO. But I’m no economist by any means.
By Steph on 09.24.08 7:05 pm | Permalink
My husband and I talked about this last night and I asked him about accountability. When we were buying a home last year we were approved for $450,000. Don’t go getting all “wow, they’re loaded” though because if we had gotten that loan, we wouldn’t have been able to pay the mortgage even for one month and still pay our other bills.
We ended up with less than half that and with me quitting my job and my husband bouncing around a bit until he finds something he likes, we struggle a bit with that. Not that we can’t pay it, but we don’t eat out, and are very careful in other areas right now. We have a BUDGET!
What about consumer accountability? Many if not most, of these people were greedy. I want a $450,000 house, don’t get me wrong, but only when I can afford a maid to clean it and a butler to carry me around so I don’t get tired walking from one end to the other. (keep in mind I’m in Indiana and you can get a brand new 2,400 s.f. 4 bedroom 3 bath house on a big lot for 200K in a nice neighborhood here).
My husband said that banks were practically required to approve some “bad” loans, but just like credit card debt, I totally believe in taking responsibility for one’s own actions.
I know that doesn’t help the banks when faced with all the bankruptcies and foreclosures, there is obviously a problem, but too many people are pointing fingers at the banks and the gov. when they need to look in the mirror.
Ok, I’m done…
By Kim @ What's That Smell? on 09.25.08 3:19 am | Permalink
Steph: I agree. I am not the panicking type. But this market is so manipulated that I think it’s anyone’s guess how the story unfolds.
Kim: Preach it! You have no idea how much I want to say about this. I’ll hold it in for a little longer and spew eventually. Congratulations on knowing how to work your own life.
By Myra on 09.28.08 4:14 pm | Permalink
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