Zillow is now offering 1% down-payment home loans and I don't think it's hard to figure out where we are headed
· Aug 26, 2023 · NottheBee.com

Remember the 2008 financial crisis, when a ton of lenders gave a ton of confiscatory and adjustable-rate home loans to borrowers who couldn't possibly afford to pay them back, and then the borrowers ran out of money and everything collapsed and there was a disastrous recession?

Because I remember.

Real estate marketplace Zillow has launched a new program to help people who want to buy homes but are being squeezed out of the market by a surge in interest rates.

Zillow Home Loans is offering mortgages with a 1% down payment option for eligible homebuyers looking to own property in Arizona, and will contribute an additional 2% at closing, the company said Thursday. It also plans to expand the program to other markets.

As someone who lived through the 2008 crisis, let me be the first to say:

I mean look: The economy stinks right now. That's no doubt. Interest rates are high. Many people are being boxed out of homeownership. We're seeing the highest mortgage rates in about a quarter-century. It's frustrating.

But the solution isn't to extend a bunch of flimsy, risky loans to people who in the normal course of events simply can't afford them right now. It's not as if the company is giving a low-interest loan — they're just floating a loan with a lower initial barrier to entry. And they know these people will default, so they're in it to make as much interest as quickly as possible, before that happens.

As ever, the better, wiser course of action is to just play it smart and safe. That's not fun. It might mean we don't all get the homes we want RIGHT NOW. Homebuyers might have to put their dreams on hold for a year or two or five. Nobody likes this. But this is what they call "life."

The alternative is immediate gratification at the cost of complete disaster a short while down the road. For the home-buyers and the country at large.

If recent housing market history teaches us anything, it's that just because a massive loan company offers you a loan does not mean that you take it. That's how we got 2008.

Below are two clips, one from The Big Short, one from the government's banking inquisition after the collapse, to remind you what we went through, and where we're headed again if we don't wisen up. Language warning on both. You should watch them.

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