When pondering how we got to where we are in the real estate market, it is hard not to figure that stupidity and outright fraud play roles. After all, people purchased homes with “stated income” loans, meaning that they stated to the lender that they had a certain level of income that was high enough to cover huge mortgage payments. We know that people sometimes stated income far in excess of their actual income in order to purchase a home that they simply could not afford. Those same people now face foreclosure, because they were unable to refinance the huge loan with substantial payments into something with more reasonable payments, because the property value fell. The effect of these foreclosures compounds the market’s problems, further depressing prices.

Today’s news includes a story from Bakersfield where a real estate agent and her father are being charged with fraud related to the father’s purchase of five “principal residences” in only six weeks. Read the story on the Bakersfield news site. I expect that going forward, we will continue to see stories like this one. What bothers me so much is that those of us in the real estate business who are honest, who will not help a client purchase a home they cannot afford, who will not sell a home to someone who cannot afford it or who has to engage in fraud in order to finance it, are suffering from the poor market conditions as much as those who helped to create and exacerbate it.