As the housing market begins to stabilize, we are now able to remove ourselves from fire fighting mode and take a step back in order to properly analyze just what caused the housing market crash of 2009. Not surprisingly, there is no one smoking gun to point to; however, economists have cited two major groups in the affair: Unscrupulous Mortgage Lenders and a large number of those belonging to Generation X.
The Unscrupulous Mortgage Lenders have received significant coverage in all types of media over the past four years, so let’s focus on how the economists have linked Generation X behaviors and attitudes to the housing market crash.
Generation X consists of people born after 1965 and before 1977. One of the smallest generations currently alive, second only to the rapidly declining Great Generation, this group is now coming into power on both an economical and political scale. It is due to this power that the purchasing decisions and financial stability of such a small group are having such an impact on both the crash and the rebounding of the overall housing market.
Often dubbed the “Me Generation”, this generation grew up expecting to be able to have access to virtually anything they desired. This ingrained mindset lead many of them to enter into mortgage contracts and lifestyles that, if examined with an impartial eye, would clearly be financially impossible to maintain for a prolonged period of time. This desire to make their dreams a reality, often before they were able to financially support their dreams, is how Generation X continued to fan the fire of the housing collapse.
As this group began achieving career success, their need for social status overpowered their financial reason and many of them found themselves upside down in undervalued houses or dealing with the fallout of foreclosure. In fact, Generation X carries the largest percentage of households experiencing foreclosures during the market bust. The biggest culprits had an average household income of $59,500 and over 15 years of education.
The housing market crash, followed by the deteriorating waterfall effect of the jobs market, has forced both mortgage lenders and members of Generation X to reevaluate their mindsets and adjust their financial expectations and money management habits. As this group pulls themselves back to financial solvency, many expect this experience to end up having a very positive, lasting effect on the financial power of this generation.
Marcus McCue |
EVP & CBDO