Chicago Fed: Don't Blame Us for Housing Bubble
According to a report just released by the Chicago Fed, the rise in home ownership so starkly portrayed in the graph above is the result not of loose monetary policy but of changes in the mortgage industry that reduced the requirements for down payments and expanded the pool of buyers to include less credit-worthy buyers….
According to a report just released by the Chicago Fed, the rise in home ownership so starkly portrayed in the graph above is the result not of loose monetary policy but of changes in the mortgage industry that reduced the requirements for down payments and expanded the pool of buyers to include less credit-worthy buyers. Comment: We’d certainly agree with the latter two explanations but surely you can’t completely ignore the role of low absolute and real rates.
Chicago Fed on What Created Housing Bubble [Seeking Alpha]
High rates of ownership are bad when they are accompanied with record levels of household debt. Household Debt Service Ratios are at record levels.
http://www.federalreserve.gov/Releases/housedebt/
I wasn’t trying to answer anon1’s question. (Who’s anon1? What question?). My post wasn’t snarky. I meant my comment very sincerely.
If you meant 9:44’s question, yes I believe that paying down your mortgage – homeownership – is a GREAT thing.
Anon #1’s question still hasn’t been answered (despite the snarky attempt by anon #2, who obviously didn’t understand the question). Everyone keeps reporting that the number of foreclosures has gone up, but have they gone up proportionally compared to the rate of homeownership? Without that comparison the numbers are fairly meaningless (unless you yourself are getting foreclosed on, I suppose).
The term “homeownership” seems too elastic. There’s been a great increase in mortgage holders. But they keep refinancing and using their houses as ATMs and when the scheme falls apart on them they move and/or face foreclosure. That’s “homeownership”?
Having a house paid for in full (no mortgage), or systematically chipping away at the mortgage towards that eventual goal – now, *that’s* homeownership.
I agree, what mess are we in right now?
The mess we are in today? exactly what is the mess? and don’t quote some distorted statistic that this or that is up or down from last year or 2 years ago. Mention something over some serious timeframe average.
Housing market/ # of sales and rate of increase in prices was alway called unsustainable….so seems return to more typical markets are people are calling ‘mess’.
There are certainly potential factors that could trigger a ‘mess’ but there are always potential factors out there and always will be.
This entire discussion is missing crucial points. Home ownership was clearly hurt the most by the great depression. Home ownership then was perhaps the lowest it had been every in the US.
The rapid increase in home ownership was caused primarily by the advent of the cheap automobile and the industrial boom economy in the early post-war years. Previously, people living in urban environments couldn’t buy a house if they wanted to… there were few houses for sale and transportation limited where you could live. The car allowed people to move out to Long Island and elsewhere where land was cheap and plentiful.
As well, downpayments did NOT decline until very recently. The difference was that most of the rest of the industrial world was destroyed during WWII. Britain, Germany, France, Italy, and Japan were the only other industrial powers at the time and they were all in ruins (such as the axis powers) or economically ruined (such as Britain).
The 1950’s meant the US was the only game in town and the country prospered. Every moron in the country could get a solid job pulling a lever at some factory. The rest of the world needed our goods. As well, political policies like Operation Wetback deported foreigners and immigration was strictly limited. As a result, taxes were relatively low as the welfare state had not even been created yet.
Yes, it’s true. The Greatest Generation had it all and destroyed America. I’ve said it before, and I’ll say it again: don’t have any sympathy for Grandma in her rent controlled apartment. Her generation needs to be thrown out on the street and forgotten for their grave sins against their children.
Now, I have to spend 2 months a year working to pay the interest on the national debt incurred to pay her medical bills, unlike her generation that could put that money towards a downpayment on a house.
Thanks Grandma! You wrecked the country, and enslaved me!
Agree Brownstoner. It was a combination of a lot of things that created the mess we’re in today. But you have to love the Fed, acting like they had nothing to do with it.
so what is the foreclosure rate in Californnia now? compared to rest of country…compared to its average rate for past 5, 10, 20 years?
Don’t take one stat and read too much meaning in it.