A couple of days ago I posted about how hard it can be to get a mortgage. Sadly, this story is only going to get worse. For the past several years, buyers have bought homes with zero down on adjsutable rate, interest-only notes, because "everybody knew" that the housing market was going to expand forever and anybody could just cash out and "flip" 2 years later, pocketing the huge equity run-up. Now that the market is finally contracting, there are going to be way too many people who bought more house than they could afford facing foreclosure. It's not going to be pretty. (Indeed, today's paper showed a top-10 national lender has declared bankruptcy.)
I'm not sure where my sympathies lie here. To a certain extent, it's natural to say that if somebody borrows money, they are morally and legally obligated to pay it back, period. If they are not responsible enough to do so, they ought to be in trouble. On the other hand, banks and other lenders (especially these predatory sub-prime places and credit cards) have been giving loans to people who should never have qualified for them. There is an old, old joke that defined a bank as the place that will give you a loan if you can prove you don't need the money. Those days are long gone. I don't want to be in the position of excusing irresponsible borrowing, but at the same time, there is more than enough irresponsibility on the lending side to at least share in the negligence.
Regardless, this is one of the areas that itches me. My wife and I would have liked 4 children. We have three, because we knew we couldn't comfortably support a 4th. We would like new cars. We make do with (very) used ones. We had a decent-sized, brand-new house. We downsized to a 40+ year-old, 1600 square-foot ranch--you guessed it, because it was the "wise" thing to do. We do without certain luxuries so that we can maintain adequate health, life, disability, auto, and homeowners insurance. And it's still tight, each and every month. So whenever I hear about the poor schmo whose house blows away who had no insurance (or the 50 million uninsured for health care), or the people who are being beaten to death by an excessive mortgage, or are upside down in their new car and can't get out, I have to wrestle down the impulse to scream, "Be a man! Think long-term! Make a decent decision, for once!" Then I feel guilty for being so heartless. In general, I think that when we insulate people from the consequences of bad decisions, we remove the incentive to learn and make good ones down the road. On the 0ther hand, many people are never going to get it, and we don't want to pile on and make it worse.
Oh, well. If anything, I guess I should just be happy that when the housing bubble does burst, at least I will hopefully not be one of the victims.