Categorized | Opinion

The Great Recession Part 3: The Housing Bubble

We begin Part III in the Great Recession Series.

To read the rest in the series:

The Great Recession Part 1: Caused By Y2K – The Storm of the Century
The Great Recession Part 2: Y2K Fallout

Pop goes the Dot Com bubble, long live the Housing Bubble.

So, you were one of the lucky ones that managed to rake in some major cash and pull it out of the Dot Com’s before the crash. Many did. But where are the investments now? There are still some major Tech companies doing the impossible, but all that fast and easy money has left you with an appetite for more fast cash and the possibility of retiring at 30 on some sunny beach. Life could be so good!

Smart money’s in Real Estate. Say again? Smart money’s in Real Estate. Sure. It always goes up. It can never go down in value. It’s a sure thing.

And at the time, all that was true. It was a grand investment.

So you bought a house. A bigger one, a newer one, a second one, but you bought one. And in a year or two, that $200,000 house was worth $250,000. You already had equity. Use it. Buy a rental.

Or better yet, sell it and get a bigger house. Heck, get your Real Estate license and cash in on the new moneymaker. And they did. And some warned that the big bubble would burst. They always do.

But not this time. Housing never goes down. The best possible investment and as close to a sure thing as there is. Right?

Once again, all bubbles burst. Housing is no exception.

If you slowly blow up a bubble, it will still be a bubble. Put in too much and it explodes. As we saw with the Dot Com bubble, it blew up really fast and when Y2K passed, and the investment dollars went with it, it was as if a pin was pressed into a balloon. Pop!

So what was the “pin” that popped the Housing bubble?

Simple. The high rate of defaulted loans. The catalyst for this happening were the sub-prime loans.

In an effort to sell more and more houses, some of the most incredibly stupid loans were structured to allow people with nowhere near enough income to buy a house. And as these unqualified people began the inevitable default on loans that was totally avoidable, the housing inventory grew, and values fell. The bubble burst.

Many point to the large number of qualified borrowers that also defaulted, but as the values of their homes dropped below what they owed, many thought default was the better option. Others that were forced to move for jobs or other reasone were unable to sell their house at anything approaching what they owed, so they abandoned them.

Either way, banks were screwed. They were left holding houses they were unable to sell and they were simply out the money.

Can houses depreciate? You bet.

In Part IV we will take a look at things we might have done to prevent this from happening, or lessen the devastation in which we now find ourselves.

About Tom White

Tom is a US Navy Veteran, owns an Insurance Agency and is currently an IT Manager for a Virginia Distributor. He has been published in American Thinker, currently writes for the Richmond Examiner as well as Virginia Right! Blog. Tom lives in Hanover County, Va and is involved in politics at every level and is a Recovering Republican who has finally had enough of the War on Conservatives in progress with the Leadership of the GOP on a National Level.

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Tom White Says:

Nothing is more conservative than a republican wanting to get their majority back. And nothing is more liberal than a republican WITH a majority.

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