The housing market: The U.S. economy’s public enemy number one?
After the terrorist attacks of 2001, real estate professionals touted the housing industry as the savior of the U.S. economy. And they were right. As businesses across the country struggled in the wake of the attacks, the housing market hummed along, boosting the economy.
Today, though, real estate pros aren’t as quick to boast about the impact the housing industry is having on the country’s finances. Maybe that’s because the residential real estate industry is now being blamed for everything from the collapse of Lehman Brothers and Merrill Lynch to the recent bailout of insurance giant AIG.
Now, instead of looking at the housing industry with pride, analysts are wondering what financial company it’ll claim next.
Hopefully some good can come of this. There are some economists who are predicting that the economy will bounce back, and will be stronger for the troubles it’s now experiencing. But the way the economy works will definitely have to change, and at the center of this is the housing industry.
No longer can loan officers give out money to homebuyers with terrible credit and high levels of debt. No more can they substitute gimmicks like no-interest loans and no-money-down loans for stable, reliable products like 30-year or 15-year fixed-rate mortgages.
I still remember, about five or six years ago, a mortgage loan officer telling me that interest-only loans were the future of his industry. Turns out, interest-only loans and those like them may instead have meant the end of the way mortgage lending companies used to do business. Let’s hope common sense replaces the gimmickry that too many mortgage loan officers relied on to make big money during the housing boom of 2001 through 2006.
Let’s hope we’ve all learned our economic lessons. Some shouldn’t qualify for a mortgage loan, no matter how badly they’d like to get into a house. Renting makes sense for many.
Tags: AIG, interest-only loans, Lehman Brothers, Merrill Lynch, no down payment loansRelated Stories
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