Lets talk about the housing crisis

 Everyone, as promised, here's a little bit of information on this so called housing crisis.  Now, its very true, housing is in the pits right now.  Everyone is ignoring one major fact though, this is a cycle that happens regularly, just like everything else in the economy.  Here's how it works.  People make money for one primary reason, to buy "stuff."  People buying this "stuff," allows other people to have jobs, its all pretty simple so far.  Here's where it takes a little turn.  People have jobs, earning money, and they put a down payment on a house, and the banks are kind enough to give them a loan.  So, people get houses, banks make money off the interest.  The more loans banks give out, the more money they potentially make, thats assuming everyone pays them back.  So, banks are making more money, they can afford to take more risk, giving out more risky loans.  Eventually, banks start giving out loans to people that just can't afford what they buy.  So what happens next?  A vicious cycle.  The people default on the loans, so the banks lose money and tighten up.  From there, less people can buy houses.  What happens next you ask?  Well, roofers, plumbers, sheet rockers, framers, cement layers, painters, electricians, and anyone else you can think of that may be involved in building houses start getting laid off, causing less people to make money, to buy their "stuff."  Well then, without the money to buy the "stuff," all the stores supplying those goods have to start making cut backs also, causing even more job losses.  Then the all mighty Federal Reserve bank steps in to make money cheaper for the banks to buy, hopefully loosening up their pockets and giving out loans more freely.  This can take a little or a lot of time depending on how far the housing market has slipped.  And then the whole cycle will repeat itself.  Now, here is where I get arguments going.  Who's fault is it?  Everyone is entitled to their opinion of course.  Some people say banks, yeah, maybe a little bit, they do tend to get a little careless.  Reality though, people just get into loans they either can't really afford or just don't understand.  Hey, thats just my opinion, people should really educate themselves instead of treating a $300,000 purchase like no big deal, getting into rediculous adjustable rate morgages they can't afford.