There is a crisis, and we are bring warned about it on an everyday basis at this point.  News articles, press releases and very earnest looking reporters who fret about the way that the economy is looking.  Down turn. Negative shift. Crisis. We have been here before, and we will be here again.  The pain points typically come from an over eager public wanting to spend money that they do not have, so they borrow, or build.  Looking at the way that the housing market is going is a lesson is patience.  I think that there are 2 lessons here to learn from, and they are well illustrated by two examples.

Example 1:  The Over Buying Home Debtor.

Most of us look at the people who live in non-rental properties as Home Owners.  This is not the case.  Most people living in non-rental homes do not own the home, they own the debt and little else.  The home foreclosures of recent months support this theory.  With a steady economy the housing market begins to grow and our thoughts turn to buying "up" to that better house, that better neighborhood and that better "better" just for the sake of more.  When credit is easy and the loan officers are eager, this is a recipe for liberal loans.  The fly in the ointment here, it seems to me, were the Adjustable Rate Mortgages, or ARMs.  An ARM is a great tool, when used properly, but is not a good tool for the average person.  An ARM should be used for leveraging a non-liquid financial situation to bridge the period between investment maturations.  More on that at some other point.  An ARM is not typically a wise use of a financial tool for the individual borrower who has no training in financial matters beyond balancing their checkbook and paying down a 30 year mortgage.  The lure of the ARM is in More House for My Buck illusion.  This specter of getting more for less soon materializes as deferred interest payments that come crashing upon the wallets of those who do not know how to navigate away from a non-liquid cash position.  But the banks and the lenders will seldom explain this process.  Thus, individuals who think that they are getting more, and becoming owners, are in fact just increasing their long term debt position.  This means, in the long run, they will pay more in interest, save less, have less investment potential and eventually sacrifice retirement savings to try and dig out.  Not a good way to plan for long term nest egg growth.

I am watching with interest the "new" offering by some institutions the 40 year mortgage.

Example 2: The Broken Mortgage Broker.

In an upside economy with high liquidity and seemingly low risk even the least savvy mortgage broker can look, and earn, like a superstar.  The economy is currently exacting a Darwinian price on the careers of the untested and unprepared broker.  I know of several firms that are going out of business due to lack of sales and they are blaming it all on the economy.  Every economy cycles.  That is they way things work.  It is the tested broker that has the ability to pilot through the storms of change.  It reminds me a great deal of the Dot Com bust of the 90's.  Lots of young kids with seemingly great ideas on the way that the Internet would change the world, if only they could secure the venture capitol.  And it come, in bushel baskets.  The problem with the idea generators was that they were not seasoned by cycles, had not navigated through a down market and most importantly in my mind, were not trained to work with investment boards and the high demands of investors in whose money they were now encumbered.  It was easy to have "the idea", but a difficult matter to continue to execute after the first market test.  So they, just as the brokers of today, went bang.

To counter this I have see a good example of a well thought out long term strategy would be found in Lynn Rogers and the approach she takes with her business.  She warns of the coming dangers, and offers insight into the ways that individuals should look at structuring their debt load and payment structures. 

Patience.  It is terribly hard thing to delay gratification.  As Mr. Morrison of The Doors was once heard say, "We want the world and we want it now."  I believe that we are suffering through the adolescence of indulgence in our economy.  We will cycle back and then start it all over again.  But those who plan for the down turns, who recognize the difference between owning something real, like an estate, and owning debt, will be far better served through patience and careful investing.  Or, they will be left to fret and make much ado about nothing.