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Ask youself what entities are involved in promoting high percentages of home ownership regardless of the side effects. The gov't and the National Association of Realtors.
Interesting...but your post is off-topic.
I think the feds should eliminate the mortgage interest deduction...but that's off-topic, too.
Buyers and sellers have always been out there and there have been prologned periods of time without a bubble market. It was the huge emphasis by the gov't and NAR's constant promotion to get everyone to own a house that pushed this effort. Certainly the govt's effort of lower qualification guidelines and the Community Reinvestment Act that really got things going. But it also has been a long time goal of NAR to increase the homeownership %. I don't recall them saying that perhaps the current % is about as good as it will get. They've pushed for increased loan limits too for HUD for many years.
Right now, NAR is blaming appraisers for under-appraising properties. They're at it again.
Buyers and sellers have always been out there and there have been prologned periods of time without a bubble market. It was the huge emphasis by the gov't and NAR's constant promotion to get everyone to own a house that pushed this effort. Certainly the govt's effort of lower qualification guidelines and the Community Reinvestment Act that really got things going. But it also has been a long time goal of NAR to increase the homeownership %. I don't recall them saying that perhaps the current % is about as good as it will get. They've pushed for increased loan limits too for HUD for many years.
If people are stupid enough to buy a house because NAR was telling them to the problem is we are just too stupid as a country.
I agree with you. Everyone who lost their house in a foreclosure obviously didn't know what they were doing. High LTV financing was extremely common and it didn't take a genius to figure out that it's not a good idea to not have any equity in a property. If NAR didn't think that its efforts of spending millions of dollars of advertising to encourage home ownership were working then they would have stopped years ago. Their advocacy efforts do influence the housing market.
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Interesting...but your post is off-topic.
Ha? The original poster asked about the cause of the housing bubble and my response followed numerous responses that all talked about alternative reasons for the housing bubble. The only post that's off topic was yours that simply critized the fact that I responded.
I have always thought that one of the reasons housing snow-balled in "appreciation" so expotencially over the decades was due to the added costs of commissions that kept raising prices. With people moving every few years, cha-ching.. tack that commission cost on to the price that the buyer eventually pays.
Any thoughts?
I haven't studied this much, but it seems logical that housing investors competing with those who wanted a house to live in, were the main cause. You know, I'll take 50 houses or I'll take 100 houses. Then rent them out & maybe sell if prices go higher. The demand from speculators greatly reduced supply. If I'm wrong, someone please tell me why.
Prices would only be increasing if investors were buying so many houses that it really depleted supply for the owner occupied buyers who were then forced to compete with the investors.
Also, in most areas the nicer houses that middle-class folks would live in simply cost too much money in order to be good rental propertiess. So you don't see a lot of competition between investors and owner-occupants except in a narrow range of prices near the lower end of the market. Even then, some of the best investment properties are in poor condition and it's usually the investor who has the skills to fix up these properties as compared to the 'typical' homeowner; and those properties normally have to be purchased with cash because it's almost impossible to get normal financing on those types of properties.
The lending market also turned away from the old stable way of qualifying buyers and became more concerned with the collateral. So long as there was equity in the property to support the loan amount then they were less concerned about the buyer's qualifications. That's where the no documentation loans came from. Imagine that- basically ignoring a buyer's financing qualifications. It go that bad. The collateral based lending approach also placed a huge emphasis on the value of the property and there were too many corrupt appraisers who went along with the lenders' push for higher values in excess of reality.
Flipping houses has been around for decades and isn't about to go away, but the fact the the percentage of folks who owned houses soared from 63% to 68% during the Clinton Presidency was a great indicator that tons of folks who were buying houses had no business doing so, and that the housing market was bound to implode, as numerous knowledgeable people predicted.
And yes, I forgot to mention Barney 'I want to ROLL THE DICE as it applies to this subsidized housing situation' Frank as being a major culprit, as well as Clinton's two HUD Secretaries, one of whom is now occupying the governor's mansion in Albany, NY, and is incredulously on the Democratic Party's short list for the 2016 Presidential race.
Barney Frank also testified in front of Congress that Fannie Mae was in good financial shape when in fact they weren't really even solvent at that point.
I get a few obscure appraisal publications and the editor of one of those was warning everyone for many years that OFHEO, the agency that overseas Freddie & Fannie, wasn't doing its' job properly. He was right.
Except in a place where there is no competition, I say no. The market works more at driving the price of a commodity than the seller's cost of selling it. Realtor fees certainly pressure the seller to sell for more however if every realtor-listed home was 6% above comparable FSBOs in the area, they would not sell. When they did not sell, the price would drop to be competitive. In a free market, high prices do not drag prices up but lower prices do drive prices down.
In short, it's buyers who drive the price of real estate not sellers. As an example, if baby boomers all sell their one bedroom apartments in NYC for a million dollars and suddenly move to Rio Rancho, New Mexico, they find they can buy anything in town and still have a huge bank account. The local prices skyrocket and realtors simply laugh as they go to the bank.
You can't have a market without both buyers and sellers. If buyers are the ones who determine the market then they'd be getting their houses for free. And with your example of baby boomers selling their houses they apparently had a say in what they would accept for a sales price. Take a look at any real estate transaction where the seller rejects a buyer's offer and you'll realize that they too are a market participant.
It is the interaction between those two parties that determines prices/values. If you've ever been involved in a real estate transaction as a broker while you watch both parties negotiate you'd appreciate it.
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