Economy

I find a lot of this financial crisis news confusing. I had never even heard of Fanny and Freddie before, nor the Lehman Brothers. But in the midst of the falling sky there are two things that I never hear said.

The first is that the falling of house prices is great for buyers. The falling prices are not good for the subprime mortgage lenders when borrowers bail out, nor for people who recently bought a house and sell soon after. If I sold my house now, I would lose money because my house is worth less now than when I bought it (with maintenance and interest in top of it). Since I am not selling, I don't really care. Theoretically, this would reduce my property tax. And by the time I do sell, my house will probably be worth more than I paid for it, though perhaps not in proportion to inflation.

The second is that the people who really benefitted from the housing bubble are sellers. Ok, the lenders where getting checks during this time, too, but they are the ones losing money in this whole deal. Real Estate Agencies were booming as well, but I would imagine that many agents are out of a job right now, or looking for a new one. The same for developers; it does no good to develop when it won't sell. That said, in the past ten years, sellers upgraded and are enjoying the fruits of their bigger, fancier house.

So, whats the problem? The fear is that it will be very hard for people and businesses to get loans, unless there is a government bailout. When its harder to get loans, less people buy (like houses) or start up businesses which in turn hire people which in turn buy (like houses) and make the economy go around.