Video: Sales down, mortgage rates up

Alison
By Allison Linn Senior writer
msnbc.com
updated 7/25/2008 10:47:37 AM ET 2008-07-25T14:47:37

When Brian Buckmaster first started hearing the reports of foreclosures and other housing woes, he was incredulous that so many people would get themselves into that sort of financial trouble.

Then the 57-year-old software engineer got worried.

“My second feeling was fear that those of us that chose to live within our means and be somewhat conservative with our finances will have to end up, in some way, bailing out those folks who made those mistakes,” he said.

It turns out that the Fountain Hills, Ariz., resident had good reason to be concerned. As the nation’s housing crisis continues to ensnare hundreds and thousands of Americans, even those who have done nothing wrong are starting to feel, and fret about, the repercussions.

The mortgage fallout and its attendant troubles certainly aren’t the only economic problems plaguing the country. But the nation’s housing woes are contributing to a rocky stock market, tighter consumer spending, a more difficult job market and government fiscal woes. They also are leading to stiffer credit standards, making it hard even for people with good credit to access cash.

“At the heart of our economic and financial problems is the housing downturn,” said Mark Zandi, chief economist with Moody’s Economy.com.

As more Americans feel those ripple effects, some are realizing that it’s not just foreclosure victims who stand to lose out, Zandi said. In short, “their problems are now my problems,” Zandi said.

That’s causing some to lose patience with, and sympathy for, those hit hardest by the financial maelstrom. Frustration is boiling over on Internet message boards, blogs and other public domains, as more people question why homeowners facing foreclosure or bankruptcy didn’t see it coming.

“I think that there’s a certain amount of anger,” Buckmaster said of his own reaction.

Still, he admits, “It’s tough for me to justify it.”

That’s because Buckmaster has been there. At one time in his life, he said, he found himself with more than $30,000 in debt, and he lost his car to repossession.

But Buckmaster did what he thinks everyone in that situation should do: adopt a frugal lifestyle, pay down the debt and save up for the next rainy day. Now on firmer financial footing, he questions why more people caught up in the current economic woes can’t do the same thing. Video: Bag a real estate bargain

“I’m being fiscally responsible, but now I’m being adversely affected by a bunch of people who either were not responsible or for whatever reason got into that position,” Buckmaster said.

Craig Morris, 50, also faced his own financial troubles when he was in his 20s, racking up enough credit card debt that he eventually filed for personal bankruptcy. Still, he has little sympathy for those who have ended up in difficult financial straits because they were caught off guard by ballooning mortgage bills and rising gas prices.

“The way I look at it with those people is that they were trying to be slick,” Morris said.

Twelve years ago, when Morris was shopping for his family’s home in East Stroudsburg, Pa., he admits that he was tempted by pricier new homes he saw going up in the area. But instead he bought an $80,000 home out of foreclosure and set up a savings account so he could cover the mortgage in an emergency.

That savings came in handy in 2002, when Morris said he was forced to stop working because of health problems. He said the family was able to keep up with the house payments until he qualified for disability. But now he worries that because of the wider mortgage problems, he could have trouble getting a new loan if the family makes a planned move to a warmer climate.

That concern could be legitimate.

Louis S. Barnes, owner of the Colorado mortgage bank Boulder West, said the housing crisis is now extending even to those who would, under normal circumstances, quickly be able to access credit for a home loan.

“Good credit borrowers cannot find loans,” Barnes said.

Still, Barnes said he thinks most people are understanding about the situation, and he says most of the anger he hears is from people in the mortgage and housing industry, not the general public.

“The normal American response is compassion,” he said.

Jason Robitaille said he’s among the group of Americans who take a more critical view. The 40-year-old civil engineer said he’ has always pinched pennies, and he currently rents a room in Herndon, Va., so he doesn’t have to make a costly commute.

He has been angered by news about the recent housing bill, which is intended to stabilize the housing market and curb the foreclosure crisis. Part of the measure aims to aid struggling mortgage behemoths Fannie Mae and Freddie Mac.

Zandi, the economist, said taxpayers likely won’t feel much of the pain from the measure, but some still object to the fact that the government has to wade in at all.

“That’s our tax money that has to rescue this institution that is in danger because of the stupidity of people, and the gluttony of people,” Robitaille said. “That’s how I look at it.”

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.97%
$30K home equity loan FICO 5.23%
$75K home equity loan FICO 4.67%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.28%
13.21%
Cash Back Cards 17.74%
17.70%
Rewards Cards 17.01%
16.96%
Source: Bankrate.com