Last month, I received an email from a reader of this column telling me that the problem of “keeping up with Jones” was one of the main reasons we got into real estate trouble in this country. What he is saying, if you are not familiar with the term “keeping up with Jones,” was that some people over bought or bought too expensive of a home for their income level just to keep up with family, friends, neighbors, or colleagues who had similar size homes. Still, others may have been ok with that level of mortgage payment had the economy not fallen, but when things went bad they were not able to sustain those commitments. He also went on to say that the real estate agents were partially to blame for pushing people into homes they could not afford.
I agree that this did happen and some real estate agents did push people into higher priced homes, but I am fairly sure that the vast majority of those buyers went willingly. Yes, some people did saddle themselves with too high a mortgage payment and still, others got approved for loans that should have never been allowed to buy a home. I don’t have the stats and I am not sure if this encompasses the main reason why real estate fell and fell hard. What I am sure of is that I can point the finger to at least 10 different directions that all bear some responsibility.
Here’s the good news part of this story. Since this occurred, I have seen remarkable progress. Today’s buyer is more aware of the impact of their mortgage costs than ever before. I see a more cautious buyer, a more conservative buyer, and a more informed buyer. I see very little “keeping up with the Jones’” mindset and see more and more people telling me that they do not want to be married to their home. I see more people downsizing than upgrading, and more people talking about a quality of life than things they need to buy. As far as real estate agents go, a lot of bad apples are no longer in the business and the real professionals are still here and doing well.
In summary, was the real estate crash bad? Yes, it was and a lot of people got hurt, lost homes, jobs, and families. Did this country learn its lessons about debt, materialism, greed, and what’s important in life? I am not sure; only time will tell, but I like the preliminary results.
