In today’s Washington Post, Tom Toles, the Post’s editorial cartoonist, depicts both mortgage lenders and home buyers as the culprits in the current economic crisis.

It wasn’t so long ago that Realtors were at fault since it was Realtors, hungry for commission dollars, sold anyone who could fog a mirror a house they didn’t want and couldn’t afford. Since then appraisers have also come under the gun as well as every other profession even remotely connected to the real estate sector of our economy.

Now, I guess, everyone has come to understand that “Wall Street” was really the one making the big, big bucks with the multiple layers of fees and complete freedom from regulation or oversight.

Who Caused This Mess?

The fact of the matter is that none of this happened in a vacuum.  I often compare it to the Microsoft boom or general Internet (”dot.com”) bubble.

Everyone one saw all the neighbors and co-workers getting rich (on paper) because their house was appreciating in value so rapidly (about 25% per year in this area) or Realtors were getting rich so lots of people who should have kept their day jobs became real estate agents.  Ditto loan officers.  People who had a hard time adding three rows of numbers were advising others on arcane and exotic mortgage products that they had to know in their heart of hearts were not good choices.  Appraisers kept the values rising partially because values were rising and partially because (they say) lenders were pressuring them to bring in the values needed to make the loan (”You’ll never work in this town again unless you appraise this house for [insert high number here].”).  Inspectors were working far less due to the vast amount of multiple offers and certainly didn’t want to be deal breakers lest they never get another appointment.

In short, real estate has so many different people and industries involved that the previous run-up in prices can’t really be blamed on any one or two factors.  Sure.  There is certainly an aspect of personal responsibility that needs to be acknowledged.  People should have a sense of what they can or can’t afford regardless of what someone tells them.  I hear stories all the time that people, with no “skin in the game”, those who took out Interest Only/100% Financing type loans are just walking away because, after all, they really don’t have any investment in the house.  They’ll just pick up and start over in some rental house or apartment.

Is There A Solution for Home Owners in the MD Suburbs of DC?

The bottom line is this:  there are and were lots of people involved in this mess and continuing to point fingers doesn’t help solve the problem. We now need to pull together and find a workable solution that won’t bankrupt the economy by creating rampaging inflation or a crushing tax burden.  That’s no easy task and I’m not the one to suggest the solution.  But there are lots of smart people out there that should be able to figure it out.