A question that most certainly been addressed by many, and no doubt will continue as a hot topic for longer than we’d like. But it warrants repeat as so many of us did not heed the signs… just a quick synopsis of events leading us to our current fate, beginning in 2004:

• Years of home price appreciation spurs speculation in real estate and by builders; the myth that real estate can’t decline in value is embraced by investors and owners alike, and homeownership peaks to record levels.
• Low interest rates and loose lending standards entice marginal borrowers into the housing market; others take advantage of their “paper wealth” by tapping into their skyrocketing home equity with HELOCs.
• Lenders market the bulk of these mortgages to firms that package them for resale to bond-market investors.
• Home prices plateau, followed by stagnation and rising interest rates, and then a strong decline in many areas; builders are saddled with excess inventory.
• Mortgage delinquencies and foreclosures begin to rise, as subprime ARM’s begin to reset.
• Realizing the error of their ways, lenders tighten loan underwriting standards and appraisals become scrutinized in more detail. Home equity loans are no longer available to many consumers, and declining home values reduce the ability for those with sub-prime loans to refinance once their loans reset to higher interest rates.
• Banks and other financial firms begin to feel the impact of the sub-prime loans and the write-offs from these losses; stock market investors grow wary as well.
• The Federal Reserve takes steps to cut interest rates amid concerns over the banking system.
• The government passes the economic stimulus bill in order to attempt to jump start the economy and avoid recession.
• Loan defaults and foreclosures continue to mount; the government asks lenders to work with borrowers to modify loan terms with the Hope Now initiative, and ultimately passes legislation to formalize plans.
• The price of oil hits records levels, with ramifications of this expense trickling into all other areas of the US economy, resulting in higher food, transportation and durable goods costs.

It’s a timeline and story with an unclear ending, and many complex and costly facets to it. Every one of us has been affected by this crisis and we’ve probably got a long way to go before it’s history, but I’m sure some of you have better informed opinions you’d be willing to share as far as this prediction…

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