In previous posts, I have expressed an interest in unique and novel real estate development projects and their impact on the environment as well as surrounding communities. I have been fascinated with finding new ideas and methods for architecture, building design and land use around the world, which have the potential for improving the quality of life and protecting the environment. However, this week I explored the blogosphere on a much talked about issue that is currently affecting millions of Americans. One would have to be living in a cave not to realize that the biggest issue in the world of real estate development right now is the mortgage crisis. The circumstances brought on by the decline in real estate values, combined with the shortage of funding available will make it difficu
lt for developers to take risks with new ideas and untested technology. The stock market is plummeting and global financial markets have been in turmoil for weeks. Is the housing market going to crash? That is the million dollar question which many want answered. The bigger question that needs to be pondered is who is to blame for this crisis we are trying to tackle. Although just about everyone is in agreement that a significant factor in the current economic meltdown is the hundreds of billions of dollars in bad real estate loans sold to homebuyers who cannot afford to pay them, there is no real consensus on who is to blame. Some blame the lenders and mortgage brokers who were so quick to sign homeowners up and refinance them regardless of their ability to pay. Others blame wall street investment bankers who packaged the loans for sale to investors. Still others blame the government for not stepping in to regulate the industry. I searched the blogosphere to see who is blaming whom and why, and came across two different perspectives, both of which caught my attention. The first is on a blog by Geneva Lakefront Realty LLC. By an individual who only gives his name as “David.” His entry “Who’s to blame for the Housing Crisis?” is from someone in an industry which stood to gain by subprime loans, and he takes a very conservative stance, placing blame squarely on the American consumers, who he believes were reckless and taking advantage of banks. I thought this was an interesting viewpoint in that it places no fault whatsoever on any industry or institution. The second, “Are men to blame for our economic crisis?,” is by Shahreen Abedin at CNN.com in their ‘Medical News Unit.’ She presents a novel hypothesis for the economic crisis as a whole that testosterone leads men into taking more risks, causing them to make irrational decisions. My comments addressing these two blogs can be found below with their respective links.
Who’s to blame for the Housing Crisis?
Comment:
After doing some research, I could not agree with you more that American consumers should be blamed for the housing crisis. I agree with what you said about the lack of personal responsibility being the cause. However I don’t believe you can pin it all on the American consumer and say there was not some complicity or fault on the part of the industry or institutions. At first, I thought the banks should have had the majority of the blame, but now I believe that it is safe to say it was a tag team effort. The banks and the investment houses that bought up those loans were also taking risks when they knew better, and they were doing it with other people’s money as well. Banks knew their borrowers had bad credit and could have predicted the consequences. Nevertheless, I would agree that most of the blame should fall on the people who took out these loans and knew, or should have known, they could run into trouble. These borrowers were assuming debts they knew they could not pay, and they continued to act irresponsibly and add insult to injury by living beyond their means, taking out second mortgages, refinancing their homes, and using that money to purchase consumer goods. Unlike normal, responsible people who gradually work their way up and save their money, these people gambled with money they did not have, and frequently, when it came to borrowing money, many lied about their income. Others were just flat out rolling the dice, and being financially reckless, taking out interest only loans and hoping they could refinance as home values rose. The bottom line is that unless this type of behavior is curtailed there will always be a potential for these gamblers to ruin themselves and the economy. The government may want to bail them out along with the banks, but this is not going to solve the problem unless the people at the bottom rung put their finances in order and stop taking out loans they are incapable of paying back.
Are men to blame for our economic crisis?
lt for developers to take risks with new ideas and untested technology. The stock market is plummeting and global financial markets have been in turmoil for weeks. Is the housing market going to crash? That is the million dollar question which many want answered. The bigger question that needs to be pondered is who is to blame for this crisis we are trying to tackle. Although just about everyone is in agreement that a significant factor in the current economic meltdown is the hundreds of billions of dollars in bad real estate loans sold to homebuyers who cannot afford to pay them, there is no real consensus on who is to blame. Some blame the lenders and mortgage brokers who were so quick to sign homeowners up and refinance them regardless of their ability to pay. Others blame wall street investment bankers who packaged the loans for sale to investors. Still others blame the government for not stepping in to regulate the industry. I searched the blogosphere to see who is blaming whom and why, and came across two different perspectives, both of which caught my attention. The first is on a blog by Geneva Lakefront Realty LLC. By an individual who only gives his name as “David.” His entry “Who’s to blame for the Housing Crisis?” is from someone in an industry which stood to gain by subprime loans, and he takes a very conservative stance, placing blame squarely on the American consumers, who he believes were reckless and taking advantage of banks. I thought this was an interesting viewpoint in that it places no fault whatsoever on any industry or institution. The second, “Are men to blame for our economic crisis?,” is by Shahreen Abedin at CNN.com in their ‘Medical News Unit.’ She presents a novel hypothesis for the economic crisis as a whole that testosterone leads men into taking more risks, causing them to make irrational decisions. My comments addressing these two blogs can be found below with their respective links.Who’s to blame for the Housing Crisis?
Comment:
After doing some research, I could not agree with you more that American consumers should be blamed for the housing crisis. I agree with what you said about the lack of personal responsibility being the cause. However I don’t believe you can pin it all on the American consumer and say there was not some complicity or fault on the part of the industry or institutions. At first, I thought the banks should have had the majority of the blame, but now I believe that it is safe to say it was a tag team effort. The banks and the investment houses that bought up those loans were also taking risks when they knew better, and they were doing it with other people’s money as well. Banks knew their borrowers had bad credit and could have predicted the consequences. Nevertheless, I would agree that most of the blame should fall on the people who took out these loans and knew, or should have known, they could run into trouble. These borrowers were assuming debts they knew they could not pay, and they continued to act irresponsibly and add insult to injury by living beyond their means, taking out second mortgages, refinancing their homes, and using that money to purchase consumer goods. Unlike normal, responsible people who gradually work their way up and save their money, these people gambled with money they did not have, and frequently, when it came to borrowing money, many lied about their income. Others were just flat out rolling the dice, and being financially reckless, taking out interest only loans and hoping they could refinance as home values rose. The bottom line is that unless this type of behavior is curtailed there will always be a potential for these gamblers to ruin themselves and the economy. The government may want to bail them out along with the banks, but this is not going to solve the problem unless the people at the bottom rung put their finances in order and stop taking out loans they are incapable of paying back.
Are men to blame for our economic crisis?
Comment:
First off, thank you for your interesting take on the current global economic crisis. This is the first time I have heard that men are to blame by reason of their hormones. However, if someone is going to really sit back and blame this entire mess on a man’s testosterone I think someone needs to do a little more research. Preliminarily I would point out that in the world of economics and finance risk-taking is not necessarily a bad thing. In fact, without the entrepreneur who is willing to risk his (or her) capital in business, the economy would not function. As you point out, it can be argued that men are more successful money makers because they do tend to take g
reater risks compared to others. It is irresponsible risk-taking that can lead to disaster. I also wonder if you leaving the impression that women played no role in the current crisis, which is very much related to the mortgage crisis brought about by risky lending practices in subprime residential real estate loans. It is clear that this situation is caused by American consumers and their inability to fully understand and live within their means. Yes, banks did play a tremendous role in putting us into this mess, but our government is also considering bailing out thousands of people that acted stupidly. These consumers did irrational things in order to purchase residential property they could not afford, and took irrational risks as well. Now that the bills are coming due the bubble is collapsing. I would also suggest that a significant portion of home buying and refinancing decisions are made by married couples whose combined incomes are used to purchase residential property, so it might not be fair to blame male testosterone as the sole cause of the global financial meltdown. I am curious as to your thoughts about whether women should share some of the responsibility as well, or do you think financial irresponsibility is only a male trait?
First off, thank you for your interesting take on the current global economic crisis. This is the first time I have heard that men are to blame by reason of their hormones. However, if someone is going to really sit back and blame this entire mess on a man’s testosterone I think someone needs to do a little more research. Preliminarily I would point out that in the world of economics and finance risk-taking is not necessarily a bad thing. In fact, without the entrepreneur who is willing to risk his (or her) capital in business, the economy would not function. As you point out, it can be argued that men are more successful money makers because they do tend to take g
reater risks compared to others. It is irresponsible risk-taking that can lead to disaster. I also wonder if you leaving the impression that women played no role in the current crisis, which is very much related to the mortgage crisis brought about by risky lending practices in subprime residential real estate loans. It is clear that this situation is caused by American consumers and their inability to fully understand and live within their means. Yes, banks did play a tremendous role in putting us into this mess, but our government is also considering bailing out thousands of people that acted stupidly. These consumers did irrational things in order to purchase residential property they could not afford, and took irrational risks as well. Now that the bills are coming due the bubble is collapsing. I would also suggest that a significant portion of home buying and refinancing decisions are made by married couples whose combined incomes are used to purchase residential property, so it might not be fair to blame male testosterone as the sole cause of the global financial meltdown. I am curious as to your thoughts about whether women should share some of the responsibility as well, or do you think financial irresponsibility is only a male trait?
2 comments:
Sean,
This was a very interesting post. While on the subject of real estate, I believe the current economic situation demands a close inspection of this mortgage crisis in an attempt to learn where the nation went wrong and how the problem can be solved. You introduce your topic very well and your introductory paragraph leads perfectly into your comments on the blog posts.
I think you did a good job of picking two blog posts that had similar yet opposing views (both of which differed slightly from yours) and argued against both for a middle ground where both consumer and supplier are held responsible. I agree that the consumer must be held in part responsible and this is a sign that the education system is once again failing the American people. I guess it is fair to say that the bankers were better able to predict this crisis and thus may have more responsibility when it comes to solving or preventing such a problem, but a better educated public would have made better decisions. I guess both consumer and supplier need to work towards making more responsible decisions.
I also agree with you that it is a stretch to base the crisis on man's testosterone levels. There are too many different people to blame and I do not believe that all of these people's follies can be attributed to testosterone alone. I would be interested in hearing some women's opinions who are currently suffering from the crisis and see if they can reasonably place the blame on men's hormones.
The layout of your post is very good, it is nice and clean and very easy to read. You use good pictures that accentuate your point. The links all work and you provide the reader with a few extra sources in your opening paragraph, which is nice for readers that are not as informed about the details of the mortgage crisis. It is an excellent post with interesting topics.
Thanks for finding my post and commenting on it. As a Realtor for 12 years, I do believe that the American consumer is at fault here, and applaud you for largely agreeing with me. Someone needs to do a study about the real reasons that people are walking away from their homes. I'll bet it finds that while a fair percentage of foreclosures are a result of people losing their jobs, ARM's being reset, etc, a vast majority of these foreclosures are taking place because people are choosing to walk away from the mortgages and their homes. Bank notes are interesting animals. They only collateralize the real estate, not your personal property. You can have $200k in the bank and $50k worth of cars, default on your $200k loan because the house is only worth $170k, and you walk away with your cash and your cars. They only take the upside down house and the accompanying debt. There's no incentive for people lacking personal responsibility to keep paying their mortgage on a home that they have no equity in. All this to say that indeed some foreclosures are hard luck circumstances, and for those people, I truly feel bad, but a large percentage of these foreclosures are a result of people choosing to walk from their homes. After all, it's easier to go on your Cancun vacation in February if you don't have that annoying mortgage weighing down your finances. David www.genevalakefrontrealty.com/blog
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