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# Learning from our mistakes
- URL: https://www.smdp.com/learning-from-our-mistakes/
- Published: 2008-08-27T15:00:00.000Z
- Updated: 2026-10-25T00:48:40.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

HAVE YOU EVER DONE SOMETHING utterly stupid and thought to yourself “if I had taken a second to think about that decision I could have prevented the bad outcome from happening?” I remember when I was younger I cut my hand open while opening a box. At the time, I placed my hand in front of the blade, the blade slipped and you can figure out the rest. I learned to never put my hand in front of the blade again, but an ounce of prevention would have been a worth a pound of cure.

I am a large advocate of homeownership if you can afford it.

The benefits of a home, which include physical shelter, tax shelter and a place you can call your own, can outweigh the largest con — home value depreciation.

No one likes buying something and having it go on sale the next week, or worse, buying something only to find out the price was reduce a day later. The same is true for assets, especially a home. However, as long as you can afford the payments, you can deal with a lower property value.

Having the foresight to step back and realize that purchasing a home may not be the best decision is a good move to make and follows the analogy that an ounce of prevention is worth a pound of cure.

Unfortunately, preventing a catastrophe is usually the last thing on anyone’s mind when the party is going on.

Over the last seven years, the party went on bigger than it had ever gone on before. People bought homes on “new, creative” loans that promised the world. Residential real estate prices rose to unfathomable levels. Everyone seemed happy. That was until it was time to pay the piper. The problem was many people were not able to make their mortgage payments, which caused a domino effect that is not over. As mortgage defaults mounted, lending institutions began showing astronomical losses. People lost their homes and some banks failed.

Now home prices in many parts of the country are declining to record levels. Homeowners that can afford their homes do not have access to equity lines of credit because lending institutions are tightening their credit criteria.

Many potential first time homeowners cannot attain financing because down payment requirements have sky rocketed in areas with high home values.

The current mess that the real estate and financial markets have found themselves in could have been prevented. Sure, it is easy to look back and point out the flaws, but it is more important to see what was the cause.

One of many causes was easy financing. I was, and still am, a proponent of 100 percent financing for the right person. One hundred percent financing enables an individual with a strong income to get into a property with no money down. However, the financing also causes speculators to buy and sell property like penny stocks.

Many people did buy homes and are currently in them because of 100 percent financing and can afford the monthly payments. The problem is with the people who cannot afford payments. Unfortunately, a few spoiled it for the bunch.As stated earlier, I believe 100 percent financing has its place amongst loan instruments, but I also believe there needs to be a checks and balances system for such products to help keep this crisis from happening again.

Looking back on the real estate, credit and capital markets, what is sad is that greed was the root cause for much of the mess. It is going to take a lot to get us out. It is true that the current problems in the real estate market would have been worth an ounce of prevention versus a ton of cure. However, I also believe the resilience of the marketplace will shine through and we will learn from the mistakes that were made during this real estate cycle.

MIKE HEAYN is a Washington Mutual multi-family loan consultant. He (310) 428-1342, or e-mailed at

*Originally published in the Santa Monica Daily Press print edition on August 27, 2008.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/082708.pdf?ref=smdp.com)