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I have heard many different reasons for the 2008 real estate bust, but most of the people in my town hit hard times because they lost their job.
Didn't you see what I just wrote?
The reason for the 2008 real estate bust is that it was a bubble. Assets were being bid up way past a reasonable value.
The precipitating event is not of interest. Bubbles burst. It's in their nature to do so.
Think of it this way:
Imagine someone who is 98 years old, with end stage cirrhosis of the liver, congestive heart failure, an aortic aneurysm, kidney failure, metastatic lung cancer, and diabetes requiring daily dialysis.
Who cares what the immediate cause of death is? This person is not going to live much longer.
I'd guess it was the exotic instruments tied to the real estate market that were being sold to investment houses by the banks holding the original papers which were then "collateralized" (collateral debt obligations) that were then bundled into piles and then cut up into tranches and sold all around the world. So your mortgage might be partially owned by a little town council in Norway, a sheik in Saudi Arabia and an investment co. in South Africa.
Once again, prices here in the Southland have gone into the stratosphere. I just received a flier for a 3+2 1/2 1440 sq ft, carport, no front yard, average desirable area, hillside that sold for $1,100,000. And there were multiple offers!! Double
Yeah prices are unaffordable for most people these days in areas like Southern California . Many homeowners would not be able to afford to buy their homes if they had to buy them at today’s prices .
For what people pay to rent a 1 bedroom apartment not even in a great area , they can own a nice decent sized house in a nice area in many parts of the country .
It’s no surprise that many are leaving for other states like Arizona and Texas . The thing is there is enough global demand that these people are replaced by higher income people .
A house went up for sale near us. Since it's just down the road and a potential comp for us, we went to the open house to check it out. It's a 2/2, 900 sq. ft., everything is old and dates and dirty except the flooring and countertop, the yard is tiny and nothing but dry weeds... and it's listed for $409K. This is barely even a "starter home", but by any conventional metric would require a $100K annual household income to afford.
So, while we were there, the agent was telling us about an "MCC Program" that returns 20% of the interest as a credit (not a deduction). And I'm like, Ah, HA! Some gimmick to return thousands of dollars a year back to the buyer to artificially increase their income while allowing them to continue with a storm of consumer spending, this sounds familiar...
Is it a potential teardown? What are developers paying for vacant lots in that area? I know North County is expensive but that's a lot of money - Oceanside has traditionally been cheaper and has some rundown areas.
The reason for the 2008 real estate bust is that it was a bubble. Assets were being bid up way past a reasonable value.
The precipitating event is not of interest. Bubbles burst. It's in their nature to do so.
Think of it this way:
Imagine someone who is 98 years old, with end stage cirrhosis of the liver, congestive heart failure, an aortic aneurysm, kidney failure, metastatic lung cancer, and diabetes requiring daily dialysis.
Who cares what the immediate cause of death is? This person is not going to live much longer.
People paid on time until they were laid off. The foreclosures didn't come first.
That's like your analogy saying that end stage cirrhosis of the liver, congestive heart failure, an aortic aneurysm, kidney failure, metastatic lung cancer, and diabetes caused a person to age to 98 years.
Cart before the horse, and you're looking at everyone riding the correct way like they've got their head screwed on backwards.
People paid on time until they were laid off. The foreclosures didn't come first.
That's like your analogy saying that end stage cirrhosis of the liver, congestive heart failure, an aortic aneurysm, kidney failure, metastatic lung cancer, and diabetes caused a person to age to 98 years.
Cart before the horse, and you're looking at everyone riding the correct way like they've got their head screwed on backwards.
It wasn't only about layoffs it was about people who bought homes that they could not afford to pay monthly even if they kept their jobs. I have no idea why they did it I guess they wanted to live in a nice home for a few years. Interest only loans and subprime loans were a big reason. The job layoffs came after the housing crash too when the economy went into a deep recession.
It wasn't only about layoffs it was about people who bought homes that they could not afford to pay monthly even if they kept their jobs. I have no idea why they did it I guess they wanted to live in a nice home for a few years. Interest only loans and subprime loans were a big reason. The job layoffs came after the housing crash too when the economy went into a deep recession.
A lot of people believed that real estate “never goes down “ so they viewed it as having no real risk .
Yeah prices are unaffordable for most people these days in areas like Southern California . Many homeowners would not be able to afford to buy their homes if they had to buy them at today’s prices .
For what people pay to rent a 1 bedroom apartment not even in a great area , they can own a nice decent sized house in a nice area in many parts of the country .
It’s no surprise that many are leaving for other states like Arizona and Texas . The thing is there is enough global demand that these people are replaced by higher income people .
It's true. I cannot upload the zillow pic to CD but to see it the frontage is a carport for two cars and a front door to the right. No front yard, just a small 6x6 plot for a single orange tree. Two level possibly three, wood exterior nothing fancy. I can guarantee you ordinary working families are NOT buying these houses. They cannot afford them. It's money coming in from foreign countries as foreign residents want to settle these Southland upper scale areas. This is not Beverly Hills by any means--Echo Park, Silver Lake, Pasadena, Glendale etc.but these are BH prices from the 90's.
It wasn't only about layoffs it was about people who bought homes that they could not afford to pay monthly even if they kept their jobs. I have no idea why they did it I guess they wanted to live in a nice home for a few years. Interest only loans and subprime loans were a big reason. The job layoffs came after the housing crash too when the economy went into a deep recession.
They bought houses that had an adjustable rate mortgage and no one thought those rates were going to rise that much. Plus, they were told they could refinance those houses to keep the rate low. Rates went up, houses couldn't be refinanced, and that was that.
I ought to know - I was wooed with an ARM when I went to buy my house. But I remember working at the bank in the mid 70s when people had ARMs then and I was the one who had to keep rewriting the rates on customer cards as they went up, some to 22%. I remembered that and turned an ARM down flat, even though I had to pay a higher interest rate.
The first round of foreclosures precipitated the layoffs. The layoffs then began another round of firings, this time to people who had traditional mortgages and were current on their payments. But without a job, they also lost their houses, some of them having paid on their houses for a couple decades. The whole thing sucked.
I think in any discussion of the crash, you have to include those people who did not lose their jobs and were quite able to make their monthly payments but whined that they deserved a principal reduction because their house was no longer worth what they agreed to pay for it. They believed that because it was not their fault that their property's value sunk that they were entitled to relief. Gee, why don't we just apply that to everything? It's not my fault that the stock I picked tanked, give me my money back. It's not my fault that this expensive piece of sports memorabilia is no longer worth a fortune so I should get my money back. These people, upon realizing that they were not getting what they felt like they deserved, walked away from their homes and decimated neighborhoods and local businesses. Those dominoes can fall fast.
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And there were multiple offers!! Double 
It's money coming in from foreign countries as foreign residents want to settle these Southland upper scale areas. This is not Beverly Hills by any means--Echo Park, Silver Lake, Pasadena, Glendale etc.but these are BH prices from the 90's.
