A reason never discussed about the housing bubble, the major increase in housing cost has to do with the blueprint of a typical new house. New homes are palatial in size, features and options compared to the typical new home in 1960. Shoppers bought into the idea that every member of the household requires a private bedroom with attached bathroom. And a restaurant style kitchen with the family room resembling a ski lodge. It’s just like children pretending to be royality.

Anyone thinking government will rescue them is living in a fool’s paradise. The bailout is an election year “feel good” to make voters think their current representatives are worth re-electing. There are so many restrictions that few people can qualify. Those that are accepted are postponing their financial avalanche to the future when the media’s eye is no longer watching.

2. The government bailout rescues individual homeowners, but it also rescues communities. One or two foreclosures on a block is fine, but there are some places where every house on a street is now being foreclosed. That’s a certain recipe for increased crime, and increased crime and resultant police enforcement costs something too.

Any bailout needs to be clearly one-time only and, more importantly, accompanied by changes in banking and mortgage regulation that discourage banks from offering risky mortgages to risky borrowers. My understanding is that for the past few years, banks offering mortgages would sell those mortgages to other financial institutions, and they would be re-bundled, re-parcellated, and re-sold until all sense of risk disappeared: the ultimate buyers of these instruments believed that they would be insulated from individual homeowners defaulting. Clearly, no one thinks that anymore! I’m not sure what exactly such regulations might be that would discourage banks from passing the buck. But if the banks’ incentive structure is changed, they would have no reason to offer exotic mortgages to people who can’t afford them.

Yes, people shouldn’t buy what they can’t afford. But right now, the banking structure is twisted so that the banks have an incentive to sell people things they can’t afford. Individual people will always act irrationally, while banks can hire mathematicians and economists to do their logic for them. Thus, it seems to me that the best way to fix this crisis is to change the regulatory structures to discourage irresponsible lending.

Best Wishes,
D4L

While I feel somewhat bad, I agree with the rest of you that purchased houses once you figured out if you could afford it. From the limited understanding I have about how the bailout would work, it seems unfair to the rest of you.

In the mean time, I’m looking into refinancing after the significant rate cuts of late.

I agree with Writer’s Coin — I’d like to see some sort of 1-2 page preview. I don’t even buy books on Amazon anymore unless a preview is available, which is for lots of titles at this point. You are competing with that kind of site as a source of information, so I think offering a comparable teaser makes sense.

I got your 31 Days here a while back and it is a great read. Thank you for putting it together.

Don’t you think?