Sunday, October 17, 2010

The housing crisis and the blame game

There’s enough blame to spread around the world 3 or 4 times when it comes to discussing “who caused the housing crisis?”

  • Maybe we should blame lenders who made mortgages without checking to see if buyers could make the payments.

  • Maybe we should blame home buyers who “should have known better” and realized housing prices were overinflated.

  • Maybe we should blame Realtors who were just greedy and pushed up housing prices so they could make bigger commissions.

  • Maybe we should blame appraisers who overstated home values in their reports.

  • Maybe we should blame Fannie Mae, Freddie Mac and the Community Reinvestment Act like the political conservatives claim.

  • Maybe the political liberals have it right: we should blame the big banks who took advantage of innocent home buyers.

In this long litany of blame, I've noticed lately that nobody blames home sellers who reaped record profits during 2005 and 2006. If the buyers, lenders, Realtors and appraisers “should have known better” and realized housing prices were vastly overinflated… shouldn’t the sellers have known better too?

If some buyers over-bought and some lenders knowingly made bad mortgages, isn't it possible that some home sellers knew their house was worth less than they sold it for? And why does nobody ever talk about that?

To put it bluntly: do Americans think it’s OK to knowingly profit at someone else’s expense? It appears our collective answer as a country -  at least in this case -  is yes.

I’m not saying this is The Truth, and I’m not saying home sellers caused the housing crisis all by themselves. It’s just something I’m thinking about lately. What do you think?

for more thoughtful stuff, see Chris' opinion piece from 2.5 years ago(!) where he lays out a convincing case that the housing debacle is all the banks' fault.