So the other day I started writing a rant about generations and the economy and what was wrong with the world. Overall, I think the biggest point to make is that many of my Gen X friends have done ok for themselves in this economy. They never overspent, didn’t buy houses 8 times more expensive than they should have, and lived within their means. That being said, at this point they’re worried about the economy imploding and hurting them, but they haven’t done anything to put themselves in a bad situation.
That being said, I realized what might help fix the housing crisis. The 50 year mortgage. Those who are in over their heads should be allowed to refinance their mortgage at a fair rate (maybe 7%) for 50 years. It would likely significantly lower their payments and let them stay in their homes until values stabilize. They may never make 3x profits in a short time frame, but it might let them stay in their house now. Additionally it avoids putting more and more homes in foreclosure. That protects the value of my home.
Another benefit is that no one is rewarded for bad behavior. Those who bought houses that are too big still need to pay them off. The banks who wrote bad loans in the first place have to sit with them. In the long run, maybe it brings some sobriety back to the out of control spending of the last few years. You get to keep your home but not continue spending money you don’t have on $300 jeans, big screen televisions, new cars every two years, etc.