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the last bubble was largely caused by a lot of different things. Not the lease of which were non income verification loans, strange and crazy mortgages such as ARMs which people couldn't afford. And a Wave of people who kept refinancing to upgrade their homes(remember the popularity of flipping shows) and people having no equity in their homes so when prices started to drop they couldn't sell them without seriously being underwater.
Although payments are high a lot of these other things are not nearly as bad. And the cost of renting is even more out of control then housing costs. For instance in 2009 I was going back to grad school and renting a studio apt in a decent complex for 425 a month. Today I am looking at going back to that same town and checked them out. They painted and put in some cheap stainless appliances and are now charging 1k a month. Far more than the 35% housing payment increase you are talking about. And i have seen this same thing everywhere. Its still cheaper to own and you have to live somewhere. As someone who is looking to rent somewhere I have noticed more and more private homes where people are renting out a bedroom in their house. Something I have never seen so much of before. And people are renting them.
Not it wasn't. Standards were lowered and people got loans who didn't qualify before or since. THAT is the entire cause of the problem. The free market turning into a managed market.
Everything else does add to it but those are just symptoms. After the fact and not the cause. Nothing bad happens if the bad loans were not made. still a crash but nearly as bad as what we saw.
Essentially, it was the bundling of tranches of mortgages into securities and then selling them into the open market. The appetite for these was huge, and it was difficult to judge the performance of the underlying mortgages. The banks originating them weren't keeping them on their own books so there was a perverse incentive to originate as many mortgages as possible to meet market demand for the bundled securities. That's when you got the so called "liar loans" and people being approved that should not have been. There were also government programs started under Clinton that encouraged the approval of marginal applicants in the name of fostering home ownership.
I highly recommend "The Big Short," both as a film and an explainer of what happened.
As for mortgage rates, I've lived the great majority of my adult life in a low interest rate environment, so the thought of signing up for a 30-year mortgage at say 6% is abhorrent to me. The rate rise has to be flushing out some buyers.
I'm sure I'm not the only one who stood in line for a low 10.9% mortgage in 1985 when my friends had mortgages for 18%. I don't pay 6% now, but I also see that it could be a reality again.
Back to the liar loans, the non-stop commercials in California to get no doc mortgages with no down payments and an extra 5-10% to pay off your credit cards or buy furniture were quite enticing to many. Had friends that jumped into the mortgage origination biz, writing up loans for huge commissions.
Mine is about the same as it was in 2006. The 30 year rate was over 6% back then. My rate now is 2.8%. And the same about property taxes, they are the reason I am not paying less now, although I am when adjusted for inflation.
But this is about the average mortgage payment, which includes new buyers at the higher home prices.
I do think these prices are not sustainable unless we start seeing some serious wage inflation.
And remember, every crash is immediately preceded by hoards of speculators explaining why THIS time, it is different. THIS time, it is not a bubble.
well, that's all I think it is, which is why I ask.
I have no doubt the mortgage payment on a new purchase is 35% higher today than it was in 2006. But that's not what is claimed in the chart, the reddit thread, or this topic.
Rising US interest rates designed to slow inflation have priced more than 9 million homebuyers in America out of the housing market since the start of the year, according to a leading property economist.
in the article, it says 3 million Millenials, so not sure where the 9 million comes from, but not too surprised since it's Business Insider.
And 9 million doesn't really make sense anyway, since only ~7MM homes are sold annually.
Can you find the FRED chart on this 35% higher mortgage payment?
As a side note...
We live in a two houses property and rent one out.
Our renter is part of the family owned construction business.
He mentioned that, they have more and more contracts suspended due to buyers not being able to continue construction of theior new house, because of the high materials/lumber costs.
It's still about supply vs. demand. In the Great Recession, there was an excess of speculative inventory which tipped the balance. It's different now. Pandemic supply issues and labor constraints continue to restrict supply in the face of growing demand. Younger people are doubling up, living with parents etc. They represent a pent up, unmet demand. The way to lower prices is more construction of homes and apartments but higher interest rates from the fed are doing to stifle that. It's a complex picture, but this is not 2008 all over again.
I am surprised that the same people who argue that the 99% are falling behind and that we need more freebies to help with this, are denying the obvious reality of home prices being unaffordable for more and more people.
I still pay $695/month renting. Owning would be $1500+/month at current house prices and mortgage rates factoring in taxes, utilities, and insurance.
I can afford it but won't pay that. Average people overspend and live paycheck to paycheck.
lol if you dont mind where do you live that you can pay 695 a month without living in a ghetto and having to dodge the transients at night.
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