I agree, its not the foreclosures that is the problem, it's not even real estate in general. Its the Trillions of dollars in derivatives that have no mechanism to be priced. Most people think the risk is spread so thin that no one should get hurt but that is not true. The risk is not spread thin. It all comes back on the banking system one way or the other and our system can not handle a mulit trillion dollar hit. John
Ummmm. Greenspan retired on 31 Jan 2006. They ceased reporting M3 on March 23, 2006. http://www.federalreserve.gov/releases/h6/discm3.htm If you need somebody to blame then Helicopter Ben is your man.
Reagan took the requirements off of loans and left the government guarantees in place, that led to the S&L bailout. Is this just historical repetition? We might be headed for another bailout. The public should get up in arms about this garbage at some point.
Nice point. I've been wondering. Why haven't they raised the interest rate when everyone around has been.
Ummmm, ummmmm, it was announced before Greenspan retired. The original date of the announcement was Nov, 2005. Release Date: November 10, 2005, revised March 9, 2006
There was a time when rate was at teens in the 80's. Anyone remember how high it was ? And why did that happen ? What happened to the home prices then ?
I was a controller with US Home in New Orleans from 81/86. I believe the VA rate got to 17.5% and conventional mortgages were at 21.5% Our top 4 bedroom 3 bath house went for $89950. We were actually raising prices some so we could paying 15-20 points on buying down loans so people could buy. John
We haven't reached a tipping point yet. Banks don't have enough ketchup to pour on the repo's to eat them, and they sure can't sell them, not just yet. The scales will tip tho, when buyers's ARM's damn near double, in about 8 to 12 mths, they'll be walking off leaving the keys in the mailbox. Then flippers and buy & hold landlords who've been holding cash will step into the Mkt cuz the prices will be right. Then the scales will balance for a while.
What I recall was that affordability suffered due to rates but it was NOTHING like our current troubles. The reason is that the other side of the affordability equation - loan amount and purchase prices never soared like this bubble. Plus you had to have equity - none of this 100% financing, non-bank lending, and risk transfer existed. Your hometown bank had skin in the game. People didn't have these huge household balance sheets back then with big assets but also big liabilities. And couples where the wife worked were doing fine - now it seems they both have to work of necessity to stay even. So, it was way more manageable. I had 60-80K mortgages on properties in the range you mention above - 850/mo payments as an example. People have car and boat loans at those levels now.