Originally Posted by
livedarklions
Superficially, we are disagreeing, but it's a matter of perspective. My job as a bankruptcy lawyer was working with the victims of the housing bubble--people conned into buying too much house with terrible mortgages. From those people's perspective, the reason they bought into it was mainly because they believed conventional wisdom that the value of real estate always goes up, so they'd be able to sell the property before any balloon payment or whatever booby trap clicked in, or better yet, refinance it at that point. Very rapidly, these became mortgage payments they couldn't afford with a property that couldn't be sold or refinanced because it was over-mortgaged.
People who were buying stupid dotcom stocks were doing so because they thought people had discovered technology and ideas that made basic economic principles irrelevant.
Since the thread is supposedly about how we decide to buy bikes, I've looked at these bubbles from the "consumer's" perspective, not that of the perpetrators or bankers.
Not arguing or specifically pointing these comments to you!!! Just venting that the concept this logic does not make any sense. From the consumer end, the bad flags were there. Take the house out of it. Buy something for an amount you know you can't afford, example $3k/month. To somehow think that $3K/month will go away or go down and you'd be able to suddenly afford it later does not make sense. The price you paid and your monthly payment would NEVER go down (unless you perpetually extended payments to some eventual outcome). These were conscience decisions. These decisions were not made in a sterile bubble void of information and resources pointing out potential pitfalls.
they believed conventional wisdom that the value of real estate always goes up, so they'd be able to sell the property before any balloon payment or whatever booby trap clicked in,
Sell and then what? Live in a tent as the plan? Sell that house and try to buy another house that is even more expensive now for a net gain of nothing? You still had to live somewhere. Maybe they thought their house would go up in value but no others would? They could sell theirs at a premium and buy one that did not go up for some reason? That plan fails basic logic.
or better yet, refinance it at that point.
And then pay even more? If you can't afford the mortgage before, how would you afford to finance even more later. If you could not afford it on day 1 regardless of any bubble or value later that day would never come and that is obvious.
Opening up the availability of loans and money and telling someone they can afford it is not a con. People made the decision to buy more than they could afford. In my opinion, no law, government, loan officer, salesman, neighbor, can predict or tell me that. This is personal responsibility issue. This was not some inherent scam, bait and switch, someone did not do a sneaky swap on you behind the scenes, something hidden like a faulty airbag or a defective product or sell you a house not up to code or on swamp land. People LOVE to blame someone else for their problems and decisions. I see that even with cars, someone was approved for $550/month. They make no effort to think if they can actually afford that or afford to replace the tires eventually or even pay the insurance. You can't blame the car dealer, regulators or the lender. Far too often the person that falls into that trap will blame someone else. Someone else should have protected me from myself!!! I bet there were a lot of people telling these people something they did not want to hear at the time..