Of all the “gurus” in the world, Larry Winget has become one of my favorites. Why? Because he tells it like it is. He doesn’t sugar coat anything and he’s always cosistent. I like that.
Larry’s been a busy guy lately making appearances on various TV shows and doing all the things that gurus do. He took some time out to answer some questions I sent to him regarding the housing crisis. Below is our email exchange. If you would like to hear or read more from Larry, check out the video vault on his website, LarryWinget.com or check out his latest book, You’re Broke Because You Want to Be (Affiliate Link). I spent some time watching quite a few of the videos recently. Good stuff.
If after reading the Q&A below you have questions for Larry, leave a comment and I’ll see if I can talk Larry into stopping by to reply.
1. What’s your take on the housing crisis? What caused it?
Well, the subprime lenders are taking the blame for the crisis but I think there is much more to it than that. The lenders are the scapegoat for the most part. There were a FEW bad guys but not enough to cause a problem of this size. I think the primary cause of the crisis is that people were irresponsible and bought more house than they could afford. Money was easy to get and they took it and didn’t give much thought to the FACTS. And the facts were that their mortgage was going to go up at some point. “But no one told me that!” Bull. It was in the paperwork. If you didn’t read it or understand it, that is your own fault.
Besides, what made people think that they could at some point afford both the principal and the interest when they could barely afford the interest only loan they took out on their house? But instead of blaming themselves, they blame the mortgage company for loaning them the money to begin with. That is wrong. Some people took interest only loans or ARMs and took that entry time to save and earn so when their mortgage adjusted they would be ready. Those were responsible people and are to be admired. Not everyone got screwed by the mortgage companies – most people were greedy, irresponsible and caught up in “keeping up with the Joneses.”
2. You live in Arizona. How has the housing crisis affected your area?
I just read today that Arizona has experienced a 21% drop in housing values in the past twelve months. Arizona is one of the hardest hit locations in the country. It hit us hard. It hit ME hard as I have lots of property.
Interesting fact though: High priced houses (2 million and up) are still being built and still being sold. Why is that? Some will say it is because the people who buy those houses are rich. Right. But look deeper than that simple answer. Why are they rich? What do rich people do with their money? What do rich people do with their time? What do rich people that allows them to be able to afford to build and buy and invest that other people don’t do? A rich person buying a 5 million dollar house is no different than a regular guy who earns $40K a year buying a $150,000 house. It isn’t about how many zeroes represent your income – it’s about how you use your money, your time, your energy.
3. Is now a good time to buy a house?
Now is an EXCELLENT time to buy a house. In fact, if you can afford it, it is an excellent time to buy a dozen houses and rent them out. Face it, housing prices have been inflated for the past 5 years. (We rarely mention that fact!) Now prices are re-adjusting. Prices are down now and still dropping. It is an excellent time for first time buyers. It’s a great time for people who have been responsible with their money and have some savings to upgrade their house and get a bigger one. It is a great time to invest in real estate because there are going to be a lot of people needing to rent houses. You can invest while the market is low, rent to people who need a house and someday the market will go up again and you will have made some money. And the new legislation proposed that will allow people a $7K tax credit when they buy a foreclosed house is a real opportunity for some buyers.
4. You work with lots of people who are having problems with debt. Are any of them having problems due to the housing crisis?
People are blaming the housing crisis because housing effects lots of different areas of life: construction, furniture sales, bedding, carpet, and lots of areas of manufacturing and retail. So everyone is affected at some level by housing issues. But housing is not to blame for most people’s problems. Overspending is the culprit. Four dollar a gallon gasoline isn’t as much of a problem for middle America as a four dollar a cup coffee. People are not willing to modify their lifestyle in order to live on what they earn – that is the real problem.
5. What’s your opinion of the various bailout programs being thrown around? Is a bailout necessary?
I am anti-bailout on any level and every level. Consequences are a good thing. They teach us lessons. Any lesson, not learned will be repeated. I know that foreclosure is hard – I’m not a total jerk and my heart goes out to some people who are in real trouble. But if you have been irresponsible and get bailed out you haven’t learned any lesson. Therefore you will probably repeat the mistake again at some point. Bankruptcy is a prime example. More than half of people who file bankruptcy end up doing it again within ten years. The bail out they got didn’t teach them a dern thing.
A good parent lets their kid experience the pain of their mistakes knowing it will make their child stronger and better. The government should let its’ children learn their lesson this time too. IF we force people to tough it out and learn for their mistakes on this one, we will make a better society down the road. Bail people out and they will do the same thing over again.
And don’t forget this: only 2% of homes are in foreclosure. That means 98% of homeowners are paying their mortgages.. Even though it might be tough, they still figure out a way to do it. Why should those people pay for the mistakes of the two percent? I am not willing to have my tax dollars bail out people who made an error in judgement.
6. Finally, where does personal responsibility fall into the equation?
I like this question. It always , always, always comes down to personal responsibility. You entered into an agreement. You signed a contract. You gave your word. Keep it. Period. It is a matter of self-respect and integrity. The fact that you don’t like the deal you made, the contract you signed, or you didn’t understand it……. none of that matters. You still did it. Live with it. Knuckle down, face the music, get tough and fight your way through it and out of it. Like your parents and grandparents would have done. Go to the mirror, take responsibility, feel remorse and fix your problem.