subprime

August 18th, 2007 economics, taxes

Like the dot com bubble a few years back, our movin’ and shaken’ housing market has finally caught up with reality.  The subprime mortgage crisis didn’t require a PhD in finance or economics to give cause for concern two years ago (or more) - you could see it coming if you looked.  What makes this frustrating is that a lot of money is being made by those who did see it coming - and it’s not you or me.

First off, many of us had our property values reassessed at the peak of this frenzy… and now pay taxes on values no bank in the nation would lend money on… But that’s only part of the problem.  Greed… be it the tax collector, or you and me… got us here.  While the economy is good, we can’t resist a splurge.  So when the interest rates are low, and the income is good, we spend as much as we have and buy the biggest house on the block… and then the one next door to sell at a profit; it’s all good.  It’s a lot like a chain letter (an anachronism… but they do it differently with email) - and while there’s one born every minute, there IS a finite number of them.

So when interest rates were low, why did we buy the most expensive house we could afford? Or refinance to the max and buy that 50″ LCD and a new Lexus.  We could have bought a nice house for half the price and saved the difference, right?   But then that would have been unamerican.

Take a deep breath - it ain’t over yet.