>>>>>>The rule used to be that you could only get a loan for 80% of the purchase price (except in some special cases). What happened a lot in the last few years is that the lenders set up special plans where the borrower could borrower the whole thing. That's part of why it's all collapsing.
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>>>>>>Tamar
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>>>>>Banks did it because they knew that they will be able to resell the loan and it was feasible because Fannie and Freddy supported mortgage resale market, and everyone was sure that government, i.e. taxpayers, will bail out Fannie and Freddy when the pyramid breaks... and it is all was correct.
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>>>>I agree with partway, but I disagree that people expected government bail-out. For that to be true, they would have had to expect the housing crash, and I think most people never did.
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>>>>Tamar
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>>>I feel we are getting here to human nature issue. It might happen that many people are stupid (i.e. never thought housing situation out), lazy (i.e. never wanted to think housing...), greedy (i.e. wanted to make too much money and didn't think housing...) or even malicious in their intent (i.e. wanted to trick lenders and didn't think housing...). I wonder why humble idea that some of them hoped on bailout cannot be allowed to this circle? I think it fits.
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>>It probably fits, but for the most part I think the percentage of people who bought houses counting on the government to bail them out when the crash came, is tiny. Most people normally expect to make money on a house. Especially in the past few years. I agree that if they sat down and really looked at history with a critical eye, they should have expected, if not something quite as bad as this, at least something similar. But often people simply don't. They buy a house because they want a house, and they expect it to appreciate in value.
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>If you take a long enough view you will always make money on housing. This is a temporary blip. Remember unless the worlds population starts contracting or remins steady there will always be a demand for more housing. And nobody is making more land so the value of that will rise. The people who are really losing out are those who bought recently with a large loan. People with money in the bank can ride this out and in ten years it will all be forgotten.

??? I thought the world was coming to an end with this downturn. Aren't we all going to be back to sitting in front of our piece of land with a shotgun across our laps and living on canned goods?