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Should Government Bailout Home Owners?

Posted Saturday, December 6, 2008

Everyone knows the US economy is in one of the largest recession we have ever seen, except of course the great depression. If you turn on the news any time of the day it is one of the main stories talked about. Record job losses, record foreclosures, record bankruptcies for americans. One thing the press is not clear on is where this economic crisis started from.

If you are are home owner you can be sure that you are familiar with where the current economic crisis came from. In 2003 to 2005 we saw the value of our houses sky rocket to the highest levels we have ever seen. Everyone was enjoying the new found rich es from real estate. This was not just another stock that caught a lucky streek. Millions of americans were enjoying making money just by living in their home.

So, being the smart investors that we Americans are, we borrowed money from the mortgage companies at 6-7 percent interest and enjoyed the returns from a real estate market with returns in the 20-30 percent increase. Many of us owned more than just our family home and some of us actually purchased twenty or thirty houses, trying to make a buck.

Then it happen. The real estate market was over saturated with new homes from home builders who were making millions from a job that used to just pay the bills. Real estate home prices started to decline in the winter of 2005 and continue to move down today. This is caused by too many homes on the market an the fact that no one can sell a house. Many of the people who owned more than one house were caught paying high mortgage payments on a home they know they could not afford in the first place. Now that real estate home prices were coming down there was no more making money from just owning a home.

Then we see the highest foreclosure ratings in years. Why, because millions of americans were trying to leverage and make easy money from owning a home. Now all the equity even the modest home owner had received is all but gone. This is what caused people to stop spending money, they had no more.

This is what caused the current economic crisis, and now the government may help by bailing out home owners who over purchased. Do you think this is fair? Well it might not matter if you think it is fair or not. If the government can stop the foreclosure crisis it will help close the bleeding wound of the United States economy. So that neighbor of yours who drives an old honda accord and lives in a half a million dollar house, just may get what he needs to keep him from going bankrupt.

New government programs will lower mortgage payment for millions of americans and in some cases they will even differ principal so the home owner will not fall into foreclosure. Most of us can admit that even though it is not fair, this is the real world and almost nothing is fair.