Good habits in homebuying

Mood of the Market

When people think of post-traumatic stress disorder, or PTSD, they may associate it with grizzled vets flashing back to gunfights in the rice fields of Da Nang, Vietnam.

But much of the buzz on the real estate "Interwebs" lately has been about how the mortgage market is now suffering from its own version of PTSD from the spanking it took after lending so much money so easily and, as a result, how much harder it has gotten to qualify for a mortgage loan over the last several years.

Virtually no one disputes that subprime loan guidelines were exceedingly loose. But the numbers seem to show that today’s standards may be too tight, if the goal is simply to minimize default; in fact, the default rates on loans originated after the guidelines tightened up are much lower than default rates on loans made before the subprime era even started inflating the real estate bubble.

In addition to the mortgage industry’s PTSD, consumers have their own version of the disease to deal with, and it manifests differently in different consumers. Some are so crushed by having lost a home or seeing those around them lose theirs, that they have decided to hoard their dollar bills under their mattresses (or in their savings accounts) despite having many better, more profitable uses for them.