Monday, September 04, 2006

Caught in the Trap

Many American workers are finding themselves caught in a trap. The bait used in that trap were the tax cuts promised by bush when he ran in the 2000 election. Many Americans envisioned receiving these refunds and were blind to everything else about the candidate. They walked right into the trap.

Sadly, while they were munching on the cheese, this administration made it almost impossible for them to declare bankruptcy. If they got into debt over their heads, the escape hatch was all but gone. One door shuts on the trap, and hardly anyone notices.

Next, the interest on mortgages drops to some sweet smelling lows. Then the price of houses goes insane. A house that would have hopefully sold for $70,000 five or six years ago, would now easily sell for over $200,000. Most young families couldn’t afford such prices. So up springs the trick or treat mortgages. All sorts of tricks to get the prospective buyer to treat themselves to a home purchase. There were interest only mortgages and all sorts of adjustable rates and payment plans. This kept the workers and their families in the trap and lured them even farther inside.

The last door just slammed shut on the trap. The housing bubble is beginning to pop. The people who purchased the highly overpriced houses are now stuck with a house that isn’t worth what they paid for it and those tricky mortgages are creeping up on the homeowner. They are finding they can’t afford to keep the home and they can’t sell it for what they originally paid for it. Since bankruptcy is not an option to many of them, what can they do? Some are letting the bank repossess their home while others are having to find a third or fourth job to make ends meet. And, they are surely in no position to be able to afford to demand decent working hours, conditions, benefits or wages.

Sadly that last trap door’s noise, as it shut, was the only one anyone seemed to hear. While the administration crows about more people owning homes in the US than at any other time, they fail to mention that many of those homeowners are now in a position where they must decide how or if they can live with those homes. There seem to be few, if any, ways out of the working American homeowner’s trap.


(Woke up my computer this morning and clicked on a link to find that I am now able to get back on line. We haven’t a clue what happened. Maybe the magic computer fairy came during the night. This is very strange but very nice to be back in cyber world again.)

18 Comments:

Blogger Lew Scannon said...

Adding insult to injury, some Republicans want to flood the labor pool with cheap immigrant labor, which will drive wages down, so when your job is outsourced, you won't be able to find a similar paying job to take it's place. In the meantime, the people at the top of the economic food chain are reaping tremendous profits because of outsourcing.
Happy Labor Day!

September 04, 2006 6:35 AM  
Blogger andrew said...

PoP,

We apologize for the interruption in your blogging activities, but we had to re-wire your connection through our database so we could track your anti-Murkan, terrist-lovin' comments.

Sincerely,
The NSA

September 04, 2006 7:29 AM  
Blogger Donnie McDaniel said...

I know the feeling POP. I just got back from work and logged on. It went through the motions and did not show it was online. The icon is not showing it as being on. Weird!

September 04, 2006 8:19 AM  
Blogger BBC said...

I always look at things with a different light I guess. While it's true that homes are hard to buy these days. I also notice that a lot of youth get tattos, and they are expensive these days also.

They buy new cars, and all sorts of things, then complain they can't afford a home.

When I was young I drove used cars, and didn't buy other nice things. But I bought a home.

September 04, 2006 8:20 AM  
Blogger Donnie McDaniel said...

Oooppss! Wrong post I commented on.

September 04, 2006 8:20 AM  
Blogger abi said...

Yes, changing the bankruptcy rules fairly early on was a clever bit of work, wasn't it.

September 04, 2006 8:23 AM  
Blogger Fixer said...

The 'for sale' signs are popping up like weeds in my neighborhood. Gotta love them 'creative' mortgages.

September 04, 2006 8:42 AM  
Anonymous Betty Cracker said...

Well said. I've long been worried about the nosedive the US economy will take when the housing market finally bursts, as it appears to be doing now.

I'm no economist, but I think it will have to be much worse than the recession that followed the bursting of the tech bubble. For one thing, the middle class is much more personally invested in the housing market. People are relying on continued high values to finance their retirement, children's education and lifestyles. Things could get really ugly.

September 04, 2006 8:48 AM  
Blogger Peacechick Mary said...

My neice and her husband are in that position right now - the mortgage mess and add the whopping insurance gouge and they are ready to fold. They have cut every corner possible and we have all pitched in here and there trying to keep things afloat, but the time is coming soon when they will loose their home. Really sad to see as they work so hard.

September 04, 2006 10:56 AM  
Blogger windspike said...

I'm just hoping the trap doesn't snap our heads off in the process of beign sprung.

September 04, 2006 4:36 PM  
Blogger vanillabirdies said...

how horrible as usual...

but thank goodness for the magic computer fairy

September 04, 2006 6:06 PM  
Blogger dusty said...

Thank you Jesus for sending the computer fairy to PoP :)

Ain't it great how the shrub just played all those sheep? Not really great..but ironic as hell.

September 04, 2006 8:42 PM  
Blogger Robert said...

I am relieved that I have a more positive view of people than ya'll do. I am of the opinion that most people can make sound decisions without all the babysitting that you want.

Interest rates too high? Whine.
Interest rates too low? Whine.
Housing costs too high? Whine.
Housing costs too low? Whine.
Declare bankruptcy? Whine.
Can't declare bankruptcy? Whine.

Does it ever end? People make decisons and then want to either a)blame it on someone else, or b) be absolved of any responsibility. I have a mortgage at 5.5%. I took great advantage of the low rates and purchased a home that I couldn't afford at 10%. And I was smart enough not to take out an ARM, because when rates go up to 8-9%, then I still have the same payment. It isn't the government's fault that someone chose to take on debt that they couldn't repay.

September 05, 2006 5:00 AM  
Blogger spadoman said...

First of all, glad you're back on-line PoP.. You do a service to the people by your posts.

bbc....Yes, sacrificing the frills and saving money to afford a major purpose is a good path, but it doesn't answer to the fact that housing costs have jumped to unbelieveable heights in a very short time. People have made millions by "flipping" houses, buying for an amount and immediately selling for as much as 50% more because of the raise in the market. The market went up s quickly only because money wa so cheap via interest rates.
Still others started business selling this inflated money. So folks less dilligent, probably the ones who decided to have a tattoo, had to pay a lot more for their mortgage than the established buyer, the one who supports the system by not getting a fucking $150.00 tattoo, like that much money makes a difference. You better get caught up with this century. Two people need to work two and more jobs to pay for fucking gas for their car, it's 2006 for crissake!

robert....you are out of touch. If you came here to ruffle feathers, and I believe you did, you did just fine. People can make their own decisions. The system is rigged for the rich to continue to make money. If you are a stockholder, you want things to be just as they are. If you are a consumer, you'd like a better deal. That isn't whining, it's called commerce. When the administartion rigs the commerce in favor of one side to a degree that is insurmountable, (the rise in housing prices), then the consumer will "whine". You must already have your piece of the pie to speak like you do.
Timing has a lot to do with it as well. In the mid 1980's, interest rates were at 14% for a home purchase. Housing prices went up so little, less than 1% per year was gained in equity. If you bought a place at that rate, you couldn't realize an investment. In 1999, you could make money and the system let you, because they knew the people they ripped off via ARM's and interest only loans would reap them their profits, so only a few get rich.
If you feel this way about anyone who points out wrongs and say that this is whining, then you probably have other hatreds as well. Too bad for you.

September 05, 2006 5:54 AM  
Blogger Robert said...

Spado, if being in touch means that I find ways to be miserable, then I guess I am. I don't participate in recessions or in misery. I never enter a blog with the intent to be troll-like. If I ruffle some feathers though, that's good for debate. But I also never make comments without some rationalization of my beliefs.

I don't see anything mentioned here that is unsurmountable. My piece of the pie is a full time job and part time teaching at a college. At this point I wills truggle to get my kids thorugh college, and I can't afford to drive a new car. What I can do is make sound decisions to benefit my family.

I live in a nice area. I could better afford to step down a bit, but my kids have great schools and an incredibly safe and friendly environmant to grow up and mature.

If someone bought a home in the mid '80s at 14%, was that a sound decision? If interest rates had been that high when I bought my first home 3 years ago, I would still be renting. Ripped off with ARMs? That is my whole point. There isn't a single person who was forced to take out an ARM. If they now have issues with the expanded payment, then it is a result of their decision, not the deck being stacked against them.

I only buy thing with cash. I don't finance anything, nor do I use a credit card. I pay about $500 a month in gas, because of an extensive commute to work. My wife didn't work for almost an entire year because of a medical issue, and we didn't have to sell the house. We cut back, and exhausted all of our liquid savings. But we were smart enough to have it there in the first place.Now that she is back at work, our first priority is to replentish that savings.

I have friends who graduated from college, got their first real job and leased expensive apartments. They traded in their leased car every year for a new one. They live on credit cards, and now that they are getting married and having kids are wondering why they can't afford a house.

It isn't about being trampled by the rich. I'm not, and never will be. It is about making good decisions.

September 05, 2006 7:14 AM  
Anonymous Knox Rover said...

I don't have tattoos, I drive a used Honda Civic, I work full-time plus freelance work, I'm a dedicated saver, and I still can't afford a home.

September 05, 2006 8:19 AM  
Blogger spadoman said...

Well robert....If debate is what you want, then debate with real people who don't have the choices like you have. You are obviously not Black, Hispanic, Hmong, Somalian, Native American or poor, not to mention the people who are just not as intelligent as you purport to be. In other words, not everyone is able to make perfectly sound decisions, especially when opportun ities and choices are not availavble. How many meals do you miss? How many times are you refused for work? Who paid for your education. etc etc etc .These are the people who don't have the skills and advisors to help them make decisions and the corporations that sell money prey on them. Remember, the TV is telling us all that to have is to be successful. When they have not, and get any kind of a chance to do so, they falter to the system.

I am glad you are fortunate in this America. Many are not as fortunate and don't have a chance against this administration and their financial policies. Once again, it is not a whine, it is seeing the strehgths and weaknesses of a situation and how it affects all people, not just your assessmant of making sound decisions.

Thank you for your response. Sincve you are so knowledgable and make only good decisions, maybe it would be a good way to serve your country by offering your services in the form of advice to those that may need it. Tell the Black man who can't get a job and is harrassed by the cops because he drives a car with a different color door panel than the rest of the car how he needs to sacrifice and make good decisions to get a home for himself and his family.

September 05, 2006 8:25 AM  
Anonymous pekka said...

This might piss some of you off but, have you taken a look around and seen what an average American considers as a basic acommondation? Big is not a word to descripe it...airport hanger perhaps.

September 07, 2006 12:50 AM  

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