With the difficulties I had in securing my home loan I decided to watch a few movies on the 2008 economic crisis. One thing I’ve come to believe is that history has echoes and some historic events have longer and larger echoes than others. It is silly to sit in 2025 and think events of just 17 years ago isn’t still impacting our daily lives when events from 80 and 90 years ago definitely still are.
What did 2008 change? For years I remember realtors talking about how homes are starting to get back to 2008 prices. I remember the condo I got in 2006 becoming a liability and not an asset. In other words I remember it but not well.
I remember some of the fallout a little more than the cause and effect of the crisis. I remember travelling and seeing entire shopping centers empty. Outside of that it was a time in my life that I made it through.
I do remember a lot of frustration involved with my condo in the coming years. Trying to find a way out from under it. I remember it feeling impossible and then I moved and rented it and discovered the way out from under it and then got rid of it. Looking back that wasn’t so smart. Add that to the pile of regrets.
In the now times the ripples are not going to be as noticeable. There are probably a handful of people still upside down on mortgages or dealing with properties they can’t unload, but those are more 2010’s problems. At this point the largest problem is the restrictions on lending.
I looked up just how many of the subprime mortgages failed. It was right around 16.5%. Think about it. When we talk about the crisis we think about all these banks giving out loans to people they shouldn’t and all of them failing, but less than a fifth of those loans failed. That is a lot higher than the current mortgage failure rate of 0.3% and you can imagine the trouble it would cause if that rose a few percentage points.
The issue in 2008 wasn’t the borrowers. It was the lenders bundled the mortgages and sold them to investors. As the demand for these mortgage backed securities grew and grew the banks ended up bundling the more risky subprime mortgages in with the good ones. Eventually people realized this wasn’t a good investment and everything fell apart like a house of cards.
We’ve reached a point in time now where the average first time home buyer is 40 and the average age of a homeowner is around 50. These are both historic highs. We have companies like Blackstone buying up the homes that would be going to first time homebuyers and renting them out.
I am not smart enough to know the solutions, but the 2018 rollback of Dodd-Frank hasn’t helped first time homebuyers and might be what opened the doors to these hedge funds. Ultimately the responsibility lies with the banks. They are the ones not lending out money. That is what banks exist to do. They hold money for their customers and lend that money out to other customers. They then collect interest on the money they lend and pay a portion of that interest to their other customers.
It should not be this hard for the average American to get a home loan. Finding a solution is above my paygrade, but one small thing that I think should count is underwriters and lenders should pay attention to monthly rental payments. If a person hasn’t missed a rental payment they aren’t likely to miss a mortgage payment. If we did this and kicked the hedge funds out of the rental market I do think there would be a large impact, and more home buyers means more sellers means higher prices and a flowing economy.
The only issue is the banks still need restrictions. It was their greed that created the 2008 crisis and if the reigns come off too much they will run. We just need to make sure that can’t happen while opening them up enough to lower the average age of homeowners and especially first time homebuyers.
David Huzzard Writes 