The headlines grab your attention with startling “facts.” Subprime Lending Practices is the Reason for the Housing Market Crunch. You will not find me defending the lending industry’s practices which I find totally irresponsible. Additionally, the majority of the people accepting these loans should have, 1.) made the effort to obtain a little more information themselves, or 2.) objectively evaluated their present and future circumstances to determine whether the loan they were applying for was a good one or not. And yes, there are a number of these people that are now in trouble. However, the fact is that only 1-2% of all foreclosures today are due to subprime loans. What is causing the other 98-99% of our problem?
Again, there are numerous things and events that are causing the problem. Let’s just name one. Unemployment. The job market has been chaotic the past couple of years in many areas of the country. Most of the country that has incurred severe job instability has experienced major real estate upheaval. A good rule of thumb is that it takes two jobs to maintain one household today. Therefore, metaphorically speaking, if a particular area has a 10% unemployment rate, 20% of the housing market is either in foreclosure or close to it. Now those are some big numbers!
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