Thursday, March 12, 2009

The @#$#@'d up economy - how did we get here?

For anyone that knows me well, it's no secret that I love reading and talking about the housing market.

And with the economy in shambles, I have to ask myself, "How did we get here?"

Why is everyone struggling?

Sure, if you lose your job, that's a hardship whether you're making 6 figures or minimum wage. We all have bills to pay and it's tough to pay your rent or mortgage without an income.

However, the bigger problem is really the housing bubble.

Why?

It's not just that banks and investors are losing their shirts because of speculation in the housing market.

Because the cost of real estate rose so rapidly the past 5-6 years, we are all now paying the price.

Why?

Because your house or condo isn't worth double, triple, or quadruple what you paid for it 2-4 or even 5 years ago.

And now every American is paying for their neighbor's greed and lack of math skills.

Say, for example, the average American household makes $46K a year. I'm not sure what the average salary is but that sounds about right according to the 2005 census.

How can that household afford an increase in rent from say $700 - 10 years ago to $1000 or $1200 now? Simply put, they can't.

I mean, most people I know are making the same or less money than they were 5-10 years ago and even if you get a raise, how many of us are making 35-50% more to cover the increase in housing costs?

It's no wonder housing prices are tanking.

It's supply and demand working its magic and as more people lose their jobs, rent prices will continue to come down. And housing prices in general will have to come down to sane levels.

I don't care how many things you cut out - cell phone, cable tv, eating out, vacations, etc. I think you could cut out all those "luxuries" and still be screwed financially because housing prices are still way out of whack.

So thanks to Alan Greenspan and George Bush and all the greedy mortgage brokers and banks and lenders. And thanks to anyone who bought real estate as an "investment" in the past few years.

Hold on to your hats, ladies & gentlemen.

We're in for a bumpy ride!

2 comments:

hitsman said...

Here's a straightforward explanation of what has been happening:
http://crisisofcredit.com/

jennifery said...

Thanks so much for the link - that's a really sweet web page! I'm gonna ask him if he'll design my indie label site.

Yeah I get all that and I also get that people charge and charge and live beyond their means. Oh well. Hopefully we'll all be ok!