Who’s To Blame? - Virginia Beach Neighborhoods

There has been much talk about the current financial crisis and who is to blame. The same goes with the housing crisis. It can be argued that they are one in the same. I claim that you can’t blame someone for something that they couldn’t see coming.

If anyone truly saw this crisis coming they would have taken action to prevent it from happening, or at least to prevent it from affecting them personally. How many people do you know who sold their homes in 2006 and moved into a rental property because of the dark clouds on the housing horizon? Do you know anyone who sold everything when the Dow was at 14000 and has been in cash since? How about now? What will happen in the real estate market in 2009? There are many opinions out there coming from people who didn’t see the downturn coming in the first place!

I am currently reading Nassim Taleb’s The Black Swan which is a very thoughtful essay on the impact of the highly improbable. He makes a point that we tend to draw conclusions from incomplete data. Some say the housing crisis was caused by corrupt lenders or polititians eager to get votes by encouraging risky lending. These things may be true, but there are a thousand other things that could be the real cause. Or maybe the combination of all the little things caused the crisis and in the absense of one of these little things, everything would be normal right now. It may be comforting to think we understand the cause but it is my opinion that we will never know. Historians and economists will spin convincing stories to explain it all, but I promise you that they won’t be there to predict the next big thing.

Consider the butterfly that flaps its wings in Singapore that causes a hurricane two years later in North Carolina (Lorentz and Chaos Theory). It would be very difficult, but it is conceivable, that you could measure the effects of the butterfly using complex computer models to predict the hurricane (I think it is safe to say we don’t have that capability right now, though). However, try doing the reverse. Think of the billions of possible causes of a hurricane. How do we know that it wasn’t the albatross in Istanbul that was the real cause. It can much more difficult to predict the past than to predict the future (this is Nassim Taleb’s logic).

So everyone is to blame, and no one. It doesn’t really matter because assigning blame won’t create or prevent the next big thing. Even if you assume that it was criminal neglect that allowed things to spin out of control, putting the culprits in jail won’t guarantee a placid future. There will be a new set of circumstances and new players that will be in the driver’s seat. We just don’t know what or who they are yet.

President Obama just said that now is a good time to buy stocks, do you believe him? When a Realtor tells you that now is a good time to buy a house, do you believe him? I certainly hope that now is a good time to buy a house, and stocks! The answer lies in what you think. Caution and common sense will steer you in the right direction.

Isn’t life great! There are opportunities everywhere. Err on the side of caution and your real estate decisions are likely to bring you profit and pleasure down the road. How do I know this? That is for you to decide.