Is the housing greed a thing of the past?

Filed in archive becoming a better borrower on July 31, 2009

There are a lot of reasons for the big housing crash that the country is still fighting through. Mortgage lenders loaned out money to customers who weren't financially able to handle a large monthly mortgage payment. Real estate appraisers overvalued too many homes. The government looked the other way as bad loans were made.

Then there are the homebuyers themselves. Many of them were greedy. They sought out risky loans with artificially low initial interest rates to buy into homes that were too expensive for them. When those loans adjusted, these homeowners could no longer make their monthly payments. Record levels of foreclosure soon followed.

Now that the housing market is beginning a recovery, albeit a fragile one, I wonder if we've learned our lessons. Or, once enough time passes, will we all make the same mistakes?

We have guests this week at our home. They've come all the way from Washington, D.C. They came with stories, too. Neighbors of theirs are upset because their home today isn't worth what they paid for it back in 2004. That's not unusual. Housing prices in D.C., and in much of the country, have fallen dramatically since the early to mid-2000s.

What's unusual here is that the owners of this house are so disgusted that their home's value has fallen that they're willing to stop making their mortgage payments and walk away from their home. In fact, they're threatening to do this unless their mortgage lender reduces the amount of money they owe.

This will never happen. No mortgage lender — especially since so many of them are barely staying in business — will respond to such a threat. And anyone whose home has fallen in value has to realize that this is part of the risk of buying a home. And it's not really that much of a risk. If you say in a house for a long enough period of time, you will almost certainly make a profit on it when it's time to sell.

Homes aren't supposed to be quick money makers. They're supposed to be a long-term investment that also provides you a place to live.