Consequences of Massive Bailouts

[LuciferSam]

No, there was a lot of temptation - the profit was insane and it's hard to watch people getting rich for doing very little when you are working hard to earn a fraction of that.

That's why so many people got caught up in it - and then got nailed when the bottom completely fell out and their other income sources dried up.

IMO most of the Sowal people I know could have weathered a 15% price drop if that was the only factor. The 50% plus drop in prices, combined with the stock market, the economy, and their lack of income is just too much.

There was not temptation for everybody. That simply isn't true. You can't speak for everyone. As for myself I had more important things to do back in those days. I've never in my life considered real estate as a way to make money. That may be considered unwise by some, but that's just me. I know that many have been very successful at it, and I also know that it's something has no appeal to me. I also know that at the time, I had no interest in selling my overinflated property just so I could by some other overinflated property in the same area. It's not worth the time and effort of having to move. My attitude was let well enough alone. My attitude on this will never change and I don't want it to.

 

[Geo]

LS,
I don't think we used absolute words like "everyone" in the discussion. But if we did, hopefully we know each other well enough to recognize that it was in error and that we're all smart enough not to view the world this way in a never/always manner.

I agree with Scooty's last few posts. Many could have weathered a reasonable fluctuation. And I also believe that a significant number of people- especially in this area- got into the game. I know this is not representative of the US but- just did a run through in my head of all 10 prop owners on my street. 10 out of 10 bought as investment prop, as a second home or live here full time but own property elsewhere as well.

 

[30ashopper]

In a fair market, values rise (and fall). But what we just saw was not a fair market.

"fair market"?

 

[Geo]

Yes. A fair market.

Here's are a few more examples-
remember the rolling electricity blackouts in CA in the 90's? That didn't happen under normal conditions. There were shenanigans going on by insiders at Enron and others in the industry that caused this.

And remember when gas all of a sudden was $4 a gallon. It didn't get that way due to normal/fair market conditions. There were shenanigans caused by industry insiders.

 

[Minnie]

In a fair market, values rise (and fall). But what we just saw was not a fair market.

It was not disclosed that home prices were artificially high as a direct result of all the shenanigans of wall street and mortgage companies.

I know it feels good for the folks who lived below their means and who resisted the temptation to extend a bit or cash out a nest egg for a nice car or a better house to say I told you so. Anyone in a bad spot is in it as a result of their choices. It is always their fault. They signed the papers. So I do not remove blame. But I do acknowledge the other very guilty parties in the equation.

If you are playing with penny stocks that's one thing. The trend is there for all to see. Again- only folks perceived as a little nutty forecasted that home values would drop 50% in a couple years.

A house on my block sold for 830k at the peak. Nearly identical house in same 10 home subdivision closed for 325k at short sale. I share an example like this and I keep getting back- well people shouldn't buy houses they can't afford. But that's just assuming. The details of the above example are that all parties DID buy houses they could afford. No one was irresponsible. So what is the crux? How did this occur? Very unnaturally!

I agree with that completely that there were plenty of outside forces at work in this situation.

I just guess for me personally it rubs that some will be bailed out for making bad decisions when others such as myself that lived frugaly and responsibly will not be rewarded for that.

We have made mistakes, one being we should have saved for our child's college much earlier. We had to dig deep and make sacrifices to cover that.

I am no financial wizard by any stretch. But when a realtor and a bank told us we could afford a house 3 times our income, I only needed to add and subtract to know that was wrong.

I am sure you and others know people that deserve your concern, I just personally do not.

The people I know that work with my husband lived extravagant lifestyles, made fun of us for where we live, looked down their noses on our lifestyle, made fun of my husband when he parked his used Honda Accord next to their new Mercedes, and now want someone to bail them out for their poor choices.

I see it kinda like the Red flags on the beach, if you ignore the warnings, you will pay the consequences of such action.

I just think most plan for the expected, we planned for the worst case scenario. Many took a gamble, we chose to be conservative and not gamble. Am I happy we were right and they were wrong, absolutely not, just very relieved. I get no pleasure out of their misery.

Do I feel they should get a bailout, no.

 

[Geo]

Hi Minnie, very fair points in your post. The only thing I would interject is that I am not supporting a bailout either. Just advocating the position that the stigma of doing something immoral/unethical no longer applies across the board.

Why? Because many drowned in big riptides while the lifeguards were sleeping and the locals told them the water was perfect.

 

[Minnie]

Hi Minnie, very fair points in your post. The only thing I would interject is that I am not supporting a bailout either. Just advocating the position that the stigma of doing something immoral/unethical no longer applies across the board.

Why? Because many drowned in big riptides while the lifeguards were sleeping and the locals told them the water was perfect.

I understand your point and agree to some extent.

I guess my husband and I are not the norm and are very cautious. I would never trust my life to a lifeguard that might be asleep or distracted by a cute babe in a bikini, and before I went in deep water I would do my research and make sure I understood the dangers of a rip tide. If I felt my ability to stay safe was not a sure thing I would stay on the beach. Doing that might not be as exciting but I would not be in danger.

Thanks for your insight though; I always enjoy hearing it, whether I agree or not.

 

[LuciferSam]

LS,
I don't think we used absolute words like "everyone" in the discussion. But if we did, hopefully we know each other well enough to recognize that it was in error and that we're all smart enough not to view the world this way in a never/always manner.

I agree with Scooty's last few posts. Many could have weathered a reasonable fluctuation. And I also believe that a significant number of people- especially in this area- got into the game. I know this is not representative of the US but- just did a run through in my head of all 10 prop owners on my street. 10 out of 10 bought as investment prop, as a second home or live here full time but own property elsewhere as well.

I understand, but I just know a number of people who never considered diving into this. When my property value peaked I remember thinking there is no way I would buy at those prices. I mean the upper income job base in NW Florida has never been very strong, so what sort of sustainable residential customer base do we have for expensive homes here? It's been that way in the Panhandle as long as I can remember. I was thinking maybe there was going to be an influx of wealthy retirees coming into the area.

I'm talking about the expensive row houses along Thomas Drive in Panama City as well. Some of them were selling for $600-700K and people were buying them. That's for maybe 1500 sqf. For anybody who has lived here more than 15 years I think the potential downside must have seemed obvious.

In any event, this is all really academic. I don't think anybody really needs to explain why the made a "right" or "wrong" decision if it's even possible to make such a determination. I will say that no amount of analysis of past events will ever help me see the system gamers in a favorable light. Nevertheless, if I found myself in a jam, I could definitely see myself going that route. It's just not a situation I'd ever want to find myself in.

 

[scooterbug44]

Why? Because many drowned in big riptides while the lifeguards were sleeping and the locals told them the water was perfect.

"Swim at your own risk."

So my parents made me learn how to swim, they sell life preservers, I trained to be a lifeguard, and my college made it a graduation requirement because they thought it was an important life skill.

All I want is for people to take some responsibility for their decisions and choices instead of blaming someone else. I make bad decisions, I screw up, and 99.9% of the time IT IS ALL MY FAULT!

There have been no reports of people being physically coerced into borrowing, going deeper into debt, refinancing, or buying more than they can afford. They made these choices and while I certainly do not hold the banks et al blameless, they still chose to borrow that money and ignore the potential negatives (and in many cases basic math)!

People want the government to stay out of their lives, but as soon as something happens they are crying foul because the government didn't do enough to save them from themselves.

There are a lot of good people who have been hurt by the real estate bubble popping and the economic downturn. There are a lot of people who took calculated risks that didn't pay off like they wanted.

But there are also a lot of people (on Main Street, Wall Street, and in gov't buildings topped by domes) who seem to have not learned a damn thing through all of this and will continue to make the same dumb decisions that the rest of us will have to foot the bill for.

 

[LuciferSam]

"fair market"?