Economic crisis

So lately I've been better about tracking my finances and getting myself out of debt and I've been following a lot of personal finance blogs to keep myself on track. As a mid-20's American who wants to eventually have a house and a family without a staggering amount of debt, I've become interested in the sub prime mortgage crisis, increasing food and gas prices, and the relationship that Americans seem to have with debt.

Both Jesse and I have agreed that we would like to be in as little debt as possible, but we understand that we'll have to deal with mortgages, car payments (unless we can pay cash), and potentially (knock on wood) medical bills.


The graphic from this article in the NY Times is amazing- the problem is going to get much worse before it gets better and in my opinion, we'll see a decrease in house prices for at least a couple of years until the market stabilizes. Because now we are seeing defaulting mortgages on prime loans and not just the subprime loans. Prices on food, gas, and other necessities are probably a cause of this, but also irresponsible spending. The economy going into a recession will force people to live within their means and buy what necessities they can afford. With more fiscal responsibility by both consumers and the government, (economic stimulus...) house prices will fall back to normal ranges that people not lying on their mortgage applications can afford.

The problem behind this is the idea of keeping up with the neighbors. You and I watch HGTV and TLC and see these house remodels with cherry cabinets and granite countertops and hardwood floors that everyone must have to make their house beautiful so everyone else can ooh and awww. I would like hardwood just as much as the next person (mainly because of the animals though - SO MUCH FUR!), but I understand that I may be able to do a cheaper alternative of pergo or tile that won't force me to sell my soul.

Another thing that has gone zany with housing, the economy, and debt is that people have spent too long relying on housing appreciation to justify their debt - 'Well we can get the $10000 granite counter tops because our house is worth $150k more than it was when we bought it.' Until the market goes bust and all of a sudden you have a $200k second mortgage on a house that's worth 180k5. Not a good thing.

The up side to this is that while people are urging those in the market to buy now while prices are down, they'll probably remain down for at least 1-2 years, so when it becomes more feasible for J and I to buy, we might be able to do so.

Another upside? Having a gas efficient car like Pedro, my beloved 96 civic, has become saavy.