Looking Back at the Great Recession

Discussion in 'Politics, Religion, Social Issues' started by jnpy!$4g3cwk, Jun 12, 2012.

  1. jnpy!$4g3cwk macrumors 65816


    Feb 11, 2010
    According the the below Reuters article, the net worth of the average American household dropped "to $77,300 in 2010 from $126,400 in 2007":


    Mostly due to the drop in house prices of course -- it turned out that people's houses were not worth as much as they thought. The "news" here is just the accurate numbers that require a retrospective look.
  2. Thomas Veil macrumors 68020

    Thomas Veil

    Feb 14, 2004
    OBJECTIVE reality
    Yeah, saw that.

    Well, if the housing bubble was inflating home prices far beyond what they were really worth, did we really have that wealth in the first place? Wasn't this destined to come crashing down? I mean, what really makes a home worth a certain price? For the most part, the original price + inflation - depreciation + improvements. The rest was all a crazy, get-rich-quick scheme that, as I said, was doomed to come back and bite us in the ass.

    Amusing that people call Social Security a Ponzi scheme, but not this. :rolleyes:
  3. Zombie Acorn macrumors 65816

    Zombie Acorn

    Feb 2, 2009
    Toronto, Ontario
    We didn't bother helping people who wanted a house to raise a family in, just the speculators and banks who returned the favor with credit gridlock after they had been liquidized.
  4. VulchR macrumors 68020


    Jun 8, 2009
    'Looking back at the Great Recession'? Isn't it still ongoing?
  5. citizenzen macrumors 65816

    Mar 22, 2010
    Side effect of the economy: my FHA adjustable rate mortgage keeps going down.

    Yesterday I received notice of another reduction from 3.625% to 3%.

    The recession has been very good for my house payments.
  6. MorphingDragon macrumors 603


    Mar 27, 2009
    The World Inbetween
    At least your mortgage rates are going down. :(
  7. citizenzen macrumors 65816

    Mar 22, 2010
    It's crazy.

    I should not gloat.

    Far too many people are suffering.
  8. Zombie Acorn macrumors 65816

    Zombie Acorn

    Feb 2, 2009
    Toronto, Ontario
    3% is still too much if you aren't employed due to a recession.
  9. jnpy!$4g3cwk thread starter macrumors 65816


    Feb 11, 2010
    Not in the U.S. The economy has been growing since mid-late 2009. Unemployment is still high, but, as economists always brightly tell us, employment -- the thing ordinary people care about most -- employment is a lagging indicator. That's why they call economics the "dismal science".
  10. citizenzen macrumors 65816

    Mar 22, 2010
    Yes. Sharing an apartment may be more practical.
  11. malman89 macrumors 68000

    May 29, 2011
    The economy is still a house of cards able to be blown over by the next big gust, either from Europe or China.

    Just think if the US government didn't throw an arm and leg to do as much as they did to save the housing market - prices would've probably plummeted another 20%.
  12. NickZac macrumors 68000


    Dec 11, 2010
    Can we really put excessive blame on the government for this? I don't think so.

    Do you guys remember how violently house values were rising a decade ago? I mean, it was ridiculous. Everyone said that it wouldn't last and sooner or later something would give. The standard of living in the US was not rising where as real estate was booming. People bought properly on 'perspective', sometimes years ahead of being built for prices they could never afford but with the plan to sell the house upon completion for a huge profit. People did this with 'interest only' loans as well. Banks would give people with minimal income massive loans that they knew they did not make nearly enough to afford. It couldn't go on forever...and it didn't...
  13. Happybunny macrumors 68000

    Sep 9, 2010
    Didn't you have a programe on the TV called 'Flip that house'? :rolleyes:
  14. Teh Don Ditty macrumors G4

    Teh Don Ditty

    Jan 15, 2007
    Still do.

    Houses = ATM
  15. mcrain macrumors 68000


    Feb 8, 2002
    I heard on the POTUS channel this morning someone say that since we bottomed out, personal wealth has grown each year that the president has been in office, but I haven't been able to find a source for that yet.
  16. NickZac macrumors 68000


    Dec 11, 2010
    There were multiple shows. People would buy run down houses, fix them up, and then sell them for twice the purchase price or more. A lot of people went into this as small businesses.

    Additionally, many people bought property long ahead of building. They would buy a property that would begin construction a few years down the road, and plan to sell it for twice as much as they paid or more upon completion.

    Almost everyone new the housing bubble would collapse in the US, but virtually no one planned accordingly. Now we have people paying mortgages in which they owe substantially more on their home than the actual home itself is worth...so in essence they have no way out.

    A friend's parents purchased two condos in Florida 4 years ahead of construction for 400 G's a pop...their combined income was nowhere near enough to afford nearly a million dollars in real-estate and so they obviously financed it. They planned to sell one immediately upon completion and use the profit to pay off the other one, or just sell both and do the thing over again. The bank gave them a loan knowing they couldn't afford it upon their savings being expended. Well, the housing crash came and construction was delayed...and as the delay continue, the value of the property first fell back down to what they paid for it, and then quickly fell below it. Last I heard, they are estimated to be worth a little more than half of what they paid. The other problem is that because a gazillion people did this same thing in the area they bought these in (a common vacation/retirement area), there are many choices for buyers giving them more flexibility on price, and so even if they sell them for a huge loss, they will likely have an issue doing this because supply far exceeds demand. And of course they are still paying on nearly a million dollar loan with the secured collateral being worth half of that... Sadly, the above story is common. While I wouldn't say this caused the recession, it was without a doubt an aggravating force behind it once the recession began.
  17. Sydde macrumors 68020


    Aug 17, 2009
    The mortgage crisis has not gone away and shows no sign of doing so soon. Subprime lending, complete with securitization, is on the upswing, though it has yet to work its way into the mortgage arena. Finance is starting to look like an old dog.

    But an interesting idea has been floating around. The problem a great many people are facing is that they owe more than their house is actually worth. Some are suggesting that the government seize these underwater properties via eminent domain, pay the lender the market value, then rewrite a new mortgage for the borrower. Right now, people are just walking away from a situation they cannot handle, which is a dangerous trend if it becomes widespread, and it leaves empty homes to decay while the bank works through getting them resold. Keeping people in their homes is on balance better for everyone.
  18. classicaliberal, Jun 15, 2012
    Last edited: Jun 15, 2012

    classicaliberal macrumors regular


    Jul 19, 2011
    Rightly or wrongly, SS is often called a ponzi scheme because of the pyramid style funding system required to run it, requiring ever more dollars to compensate ever more recipients - similar to a Ponzi scheme. I don't see the correlation in housing?

    In my humble opinion, government deserves a large portion of the blame...
    1) Government subsidization of housing loans via FHA, Fannie, Freddie, etc. (artificial demand)
    2) Inflation ala Federal Reserve keeping loan rates artificially low (artificial demand)
    3) Private risk reduction in the form of government bailouts, promised or carried out (artificial supply)
    4) Various government policies, laws, regulations, promoting an 'ownership society', when many components of society would be better off renting. (For hundreds of years we figured out an effective set of equations to determine the riskiness of a loan... all that went out the window pre-crisis.) (artificial supply and demand)

    The housing crisis, and subsequent recession and dramatic reduction of net worth of the average American, I think is a particularly good example of how the unintended consequences of elites in Washington attempting to manipulate the free market with the best possible intentions can end in DISASTER for the very people they set out to help. Sadly, it's the poor and the middle class who will suffer most from this incredible failure of government's helping hand.

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