07/30/2009 05:12 am ET Updated May 25, 2011

The #1 Lesson of the Housing Crisis

I have now tracked the housing crisis carefully for several years. I have read twenty books on the subject, hundreds of articles and spoken with tons of experts. So, I feel that I have the standing to opine on the #1 lesson to take from the housing mess.

And that lesson is EDUCATE YOURSELF. Do not rely on the government to protect you. Do not rely on the good faith of your friendly real estate agent or mortgage broker. Do not depend upon your attorney or title carrier to help you avoid pitfalls. EDUCATE YOURSELF.

The housing crisis would never have happened if most people understood any or all of the following:

#1 No asset class can always go up in value. Economies are cyclical.

Real estate agents have an incentive to convince you to buy houses -- and, as many house as possible.

Mortgage brokers have an incentive to persuade you to take a loan which may not be in your best interest.

#4 Lenders are not your friend. They are business people with their own agenda, which may not be in your best interest.

#5 Attorneys do not generally explain to you the business (and at times legal) risks of the house purchase and/or financing process.

#6 House inspectors need to keep their referral sources happy -- that means real estate agents. So, some inspectors will be less-than-forthcoming.

#7 Leverage is a two-way street. It is great when prices are rising. But, when prices fall even a modest amount, your equity can be totally wiped out and very quickly.

Houses are money pits. You will expend more on your house than you think.

#9 Buying a house is ONLY an investment IF: (i) prices rise, OR (ii) you analyze the purchase on an income basis, i.e., what would someone rent for your house and how that amount relates to ownership expenses and debt.

The biggest risk of homeownership is illiquidity as many people are today discovering. They may wish to downsize to save money, or move to take advantage of employment opportunities, but they cannot sell their house. Default and/or foreclosure which damage one's credit rating may be the only answer.

None of this stuff is rocket science. It is within everybody's ability to understand the basic principles of home ownership and debt. It is easy to blame all the "bad guys" who created the housing and foreclosure crisis -- and there are plenty of those. But, the real blame lies on the doorstep of every person who did not take the time to educate himself or herself, who did not reach out with advice and counsel for friends or family new to the home buying process, who did not take an instructive role in their community if/when they saw problems brewing, who was elected to lead but did not take the time or invest the energy to understand the issues and deal with them proactively.

Today's crisis is housing. Tomorrow's will be something else. The ultimate protection we all have is to make well-informed decisions on how, when and under what terms we spend our money. Then, if a problem arises, we have no one to blame but ourselves.

Jim Randel is the author of The Skinny on the Housing Crisis (RAND, 2009), the winner of the Robert Bruss Gold Medal for excellence. The Bruss Award is sponsored by NAREE, an organization of 650 journalists and professionals who cover housing, finance and business.