After reading this story from Fortune I sent it to a friend with whom I had been discussing home price appreciation around that same time and added the following comments:
"An hourly employee at Target got a loan for $696k!!! Wow, now I'm really certain housing prices aren't going up any time soon!!
Basically during the last five years there was someone out there who would give anyone a loan if they wanted it. Now a bunch of those people are going to end up homeless and the people who gave them the loans and going to be looking for jobs doing something else. That's the whole story in a nutshell. And to make up for the lost money the other banks will charge you more to do business with them (as if it wasn't bad enough already)."
So what's the point? The point is there have been a lot of warning signs leading up to this crisis and too many people chose to ignore them or explained them away for their own convenient reasons. Obviously real estate agents, politicians and bankers all had motivation to try to keep the good times rolling and to push aside warnings from people like Warren Buffett and Peter Schiff or even horror stories like this one from Fortune. Not long ago, I also talked to a friend who was considering buying a house last summer and called me to ask if the numbers "made sense." The numbers didn't make sense in my opinion and in the end this person ended up renting, so I asked if they were glad they decided not to buy that house. The response I got was "Oh dear God, yes!!!" Maybe I should start a testimonials section here on this site.
Don't forget to check back to Dan's Deep Creek Blog for future updates.
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