About the housing crisis
The housing crisis affects us all in one way or another. People are scared and with good reason. We have never seen a financial meltdown of this magnitude before.
Many homeowners have walked away from their homes and let them fall into foreclosure.
This has caused a credit crunch. A financial meltdown that is affecting every country in the world.
1. Why was the price of homes inflated in the first place?
2. Why did banks make such unstable loans?
3. Why did people get these loans?
Why was the price of homes inflated in the first place?
The price of homes has gone up so high because the labor to build them has gone up. The price of materials hasn’t raised much at all over the last two decades.
The price of labor has risen for several reasons. First of all, there have been so many rules, codes, and regulations to comply with, that the cost of labor had to go up to cover the costs.
Second, the contractors and sub-contractors have raised labor prices to cover overhead expenses that didn’t exist before like insurance and administration costs.
Third, contractors have steadily raised labor prices simply because they can. The banks put a pile of available cash in front of them because of easy credit. Contractors simply did what most of us would do; take the cash and see about getting a little more on the next project.
Many people are in too deep with their mortgages because they let the banks decide what was an acceptable amount of debt for them. Many of us suppose that lenders know their business and we trust their decisions.
Many borrowers got overzealous to buy once they found a home. Easy credit was there and and it made the sale go through easily.
Naturally, this is all my own opinion. I could be way off the mark and not know it.
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