Watching The Bubble Burst

By: Cynthia Bowers
Topics: Field Notes

(CBS)

Cynthia Bowers is a CBS News correspondent based in Chicago.

For months now financial experts have been warning us that the hot housing market was a critical component of the American economy, and we're finding out the hard way they were right.

A little over a year ago I was living in the house of my dreams. We borrowed 90% of the money needed to buy the house; 80% was a 10-year adjustable rate (ARM), and the remaining 10% was an adjustable rate that could go up at any time. For a while we were okay.

Then that Fed rate started going up, and so did our ARM. Over a five-month period it increased the cost of our monthly mortgage by nearly 40%! In retrospect we were lucky that we got in trouble making a monthly note back then and were able to get out without any permanent damage.

We rented a house while we sorted out our finances, and found a smaller house a bit further away from Lake Michigan, and we will try again. We still believe in the American dream -- but we realized that scaling back our dream makes it much easier to sleep at night.

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by dleonard123 August 19, 2007 3:31 PM EDT: You got greedy and gambled to quickly get the house of your dreams paid off in 10 years. Glad to see that you learned your lesson and didn''t point the finger of blame at anyone but yourself.; Reply to this comment


by rhs648 August 17, 2007 12:05 AM EDT: Don''''t finance more than you can afford. Its that simple. When my wife and I got married we decided to taylor our bills to one income. Since then we have amased huge savings and have paid for our house in 9 years.

Posted by rmsdm4

Brilliant! It is great to see people who can curb their desires, act and think responsibly, and make intelligent financial decisions. We did the same. We paid-off our last home in 18 years and our current home in six years thus saving $180,000 in interest on our current home. Now, we have enough money to pay cash for cars, televisions, vacations and other things we want. A person does not need a doctorate in finance. A little common sense goes a long way.; Reply to this comment


by shanev137 August 16, 2007 11:28 PM EDT: Am I suppose to feel sorry for all these people who are losing their houses because of bad financial decisions they made?; Reply to this comment


by rmsdm4 August 16, 2007 10:59 PM EDT: Don''t finance more than you can afford. Its that simple. When my wife and I got married we decided to taylor our bills to one income. Since then we have amased huge savings and have paid for our house in 9 years.; Reply to this comment