Housing market crisis was very well expected, however everybody tried to took advantage of this boom. I got introduced to this market first when I was looking for my first house to buy. What I had seen, experienced was unbelievable as most of us would had. This article is based on my true observations and real facts I came across in this line of business.
Many of loan agents and realtors were totally unaware and lacking basic knowledge of rules and regulations of California’s Department of Real Estate. Many of them never passed license exam from state. Some of them were even not eligible to work legally in this line of business. Brokers were hiring people without proper eligibility and state license requirements. There was solid chain of loan agent, broker, and account executive from lenders and underwriters. These people can do anything to get loan done or deal get done for monetary benefits. They used to charge high fees and loan program for their benefits. Fees in turn used to get added into homebuyer’s principal amount of loan. Everything was well set to extract money from homeowners’ loan amount. Realtor’s created hypothetical conditions to increase bidding on houses during boom to get maximum highest bid possible to get higher commission.
These people sold loan program, which benefited them not homeowners, to get more commission from these deals. Many lenders came with 1% interest rate program to lower monthly payments, which was very popular because loan agents were getting more rebate on those programs from lenders. There was no limit to the grid. Many young people got attracted towards this business because of this easy money. There were thousands of people appearing for real estate license exams every weekend. Poor homebuyer was confused and was surrounded by these greedy people, was helpless only to fulfill dream of life: owning own home.
Due to hypothetical increase in home prices, they were constantly pressured by real estate advertisers to refinance their loan amount to refinance and to spend particularly during holiday seasons and for remodeling. That caused increase in loan amount and in turn more burden on homeowners. But it was benefited to real estate community; they were becoming richer and richer day-by-day, spending money on their expensive vacation and expensive cars at expense of common man’s loan amount.
Surprisingly, not a single regulatory organization took steps to research the cause for this boom and took proactive preventive steps to control these behaviors. Once more, common man in this country suffered under the name of ‘Capitalism’. This is very similar boom as we have seen in 2000, so-called regulations and rules were implemented after boom busted, however not sure how many of them responsible for that really got punished.
Real estate boom and its effect are worst than ever. Even decrease in short-term rate is not going to help. Increase in oil prices had made this situation worst, and made common man’s life more challenging than ever.
This time common man has to be very careful. Save as much money as you can to face future financial challenges, time ahead is very promising and one should not expect any honest and positive efforts from so called ‘Capitalist’ economy, to think about common man.