Douglas K Smith: Exploding Mortgages

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January 18, 2006

Exploding Mortgages

A survey just out from the National Association of Realtors tells us that 43% of first time-home buyers put no money down. None. Nada. Zilch. 43%. Not 23%. Not 10%. Not 5%. 43%. More than 4 out of ten.

How? Well, as housing prices have escalated during the real estate bubble, the real estate and financing industries have accomodated the unsustainable inflation through a creative range of mortgages that put all the pain 'down the road' -- in a distant future that first-time (indeed, many repeat) buyers -- dreaming of owing a home or making a killing in real estate investing -- easily overlook. Risks? Well, of course there are risks. "But if you... or if I.... don't get in on the action now, beware!"

The self-interest of mortgage brokers and real estate agents motivates them to 'help out' these first-time buyers. It's how these professionals make their money. That is not bad and it is not evil. It's human nature.

Still, the future of 43% of those purchasing homes for the first time is a precarious one. The dream can easily turn to nightmare if (1) rates rise in their adjustable mortgages; (2) home prices fall; (3) jobs are lost; (4) some one gets sick; (5) credit card debt pushes the home owner into bankruptcy; or, (6) any combination of the above.

A core principle of leadership in our new world of markets, networks, organizations, friends and families demands that concern for value be blended with concern for values such as family, social, political, sustainability and more. Leaders must see the whole of their lives. They must stop the dangerous practice of leading one way from 9-to-5 when they are at work 'making a living' and another way the rest of the day when they are at home or play or in church 'just living'.

The President of the National Association of Realtors is choosing to split his concern for value and values when he says he is not worried that 43% of first-time home buyers put no money down. "If the number was higher than that, I'd be concerned."

And how much higher would that be? 44%? 100%?

Posted by Doug Smith on January 18, 2006 02:00 PM | Permalink

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» Exploding Mortgages, II from Douglas K Smith
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