Study: Tech, not spec, fueled U.S. housing boom

[Jay_Gatsby]

Interesting article:

http://tinyurl.com/ozwr6

Don't look at me. That is essentially the message of a new Federal Reserve study arguing that productivity--not the central bank's own policy of rock-bottom interest rates--was behind a five-year housing boom that now seems to be ending rather abruptly.

[brewer12345]

*sniff* *sniff*

I smell bullsiht...

[Jay_Gatsby]

I thought we were in a real economic slump from 2001-2003 or so. As such, how could productivity have caused the housing boom? If we were so productive, why was it necessary to cut interest rates to the bone?

[brewer12345]

Real world & our creditors: "You idiots! Negative real interest rates and lax lending standards caused a US housing bubble that threatens to wreck the US economy and take the rest of the world down with it!"

Fed: "It wasn't me. It was the one-armed man..."

[danm]

What are the phases of a bubble? Optimism, speculation, greed, blame, or something ...

It's laughable, while the bubble was due to more than low rates, the root cause was certainly low rates. They're just trying to stay clean.

[newguy88]

Originally Posted by brewer12345

Real world & our creditors: "You idiots! Negative real interest rates and lax lending standards caused a US housing bubble that threatens to wreck the US economy and take the rest of the world down with it!"

Fed: "It wasn't me. It was the one-armed man..."

I am so glad I have positioned my self to be able to sit back and not worry about how to pay my mortgage.

Getting rid of the house with the 225,000 mtg and cashing in before the housing markets sure sign of hitting the skids getting the builder of my new home to cut the price by 7 K and now only have a 390 dollar a month mtg and paid almost 3 years ahead, being in a place with real estate tax bill at 3K not 9K like NJ.

And to think I have been offered jobs to teach down here in NC and to have a nice pension with medical and cola and to be only 50.

Wow. How did I do something right for a change??

[d]

you shouldn't rely on the media interpretation of the research!* here's a link to the original [/url]http://www.chicagofed.org/publicatio...er_quayyum.pdf
they state "our findings do suggest that to the extent
that house prices have grown considerably in recent
years, this is not due to unusually excessive speculation
in the housing market, such as would occur in a
bubble. Instead, our findings point toward the high
prices being driven by fundamentals"

BTW, the "wealth creation" referenced was "over the previous
decade", not early this decade.

[unclemick]

Originally Posted by danm

What are the phases of a bubble? Optimism, speculation, greed, blame, or something ... They're just trying to stay clean.

What's the line in that old Johnny Cash song(A Boy named Sue) - 'the mud, the blood, and the beer.'?

Hopefully - all the adjustments - won't be a replay of our 1966-1981 or the Japanese experience.

We're smarter this time around - Right

Buckle up - it's gonna be fun!

heh heh heh heh heh

[Jay_Gatsby]

Originally Posted by d

you shouldn't rely on the media interpretation of the research! here's a link to the original [/url]http://www.chicagofed.org/publicatio...er_quayyum.pdf
they state "our findings do suggest that to the extent
that house prices have grown considerably in recent
years, this is not due to unusually excessive speculation
in the housing market, such as would occur in a
bubble. Instead, our findings point toward the high
prices being driven by fundamentals"

BTW, the "wealth creation" referenced was "over the previous
decade", not early this decade.

Not surprising, the report is somewhat contradictory:

"While over the last two years nominal mortgage rates have started creeping up, real rates have continued to fall because inflation expectations have been rising. These considerations suggest that sustained low interest rates, possibly driven by unusually loose monetary policy, could be fueling the housing boom." Page 32.

Strangely enough, they then say in their conclusion section that:

"Our main findings are as follows. First, it appears that the housing boom has not been driven by unusually loose monetary policy. This is not to say the monetary policy has not been unusually loose, but that to the extent it has been loose, this is not what has been driving spending on housing. Second, the current levels of spending on new housing are largely explained by technology-driven wealth creation over the previous decade. Third, changes in the demographic, income, educational, and regional structure of the population account for about one-half of the increase in homeownership. That is, without any other developments, the homeownership rate is likely to have gone up anyway, but not by as much as it has done. The last finding is that substitution away from rental housing made possible by developments in the mortgage market, such as subprime lending, could account for a significant fraction of the increase in residential investment and homeownership." -- Page 43

The last sentence is the real kicker. In other words, "it wasn't us, blame the greedy bankers!"

[newguy88]

I just got off the phone with the realtor who listed my house she didn't sell it someone else did , BUT she told me NOT 1 house in the 1000 home neighborhood has sold in the past 6 weeks. There are 57 listed.

Said mine was the last to sell !

I looked at the realtor site and sure enough the same houses are listed with lower listing prices. Some substantially lower. In fact a house that was listed at 600,000 in Jan is now listed at 525,000. A house listed in may at 634,000 is now listed at 579,000. Kinda looks like the number of homes that are on the market might still in buyers eyes be over priced.

We bought ours for 230,000 sold it for 513,000. 10 years old we bought it new, Toll Brothers house. It is common knowledge what people paid for these homes in the neighborhood, it looks as though buyers are saying we will wait em out. 400,000-465,000 range ? Maybe??

Heck it still would be a good profit for many except I know how many people refinanced and used the equity as a cash cow only to see that they now have little equity!

Dummies!

[youbet]

Originally Posted by d

you shouldn't rely on the media interpretation of the research!* here's a link to the original [/url]http://www.chicagofed.org/publicatio...er_quayyum.pdf

Thanks d! *You are sooooo right! *Writers and editors who claim to be giving us an easy path to knowledge by interpreting studies and reports for us always wind up twisting the facts and sensationalizing. *

[brewer12345]

Originally Posted by Jay_Gatsby

The last sentence is the real kicker.* In other words, "it wasn't us, blame the greedy bankers!"

Uhuh, but who regulates the banks?

[Texas Proud]

Originally Posted by newguy888

I just got off the phone with the realtor who listed my house she didn't sell it someone else did , BUT she told me NOT 1 house in the 1000 home neighborhood has sold in the past 6 weeks. There are 57 listed.

Said mine was the last to sell !

I looked at the realtor site and sure enough the same houses are listed with lower listing prices. Some substantially lower. In fact a house that was listed at 600,000 in Jan is now listed at 525,000. A house listed in may at 634,000 is now listed at 579,000. Kinda looks like the number of homes that are on the market might still in buyers eyes be over priced.

We bought ours for 230,000 sold it for 513,000. 10 years old we bought it new, Toll Brothers house. It is common knowledge what people paid for these homes in the neighborhood, it looks as though buyers are saying we will wait em out. 400,000-465,000 range ? Maybe??

Heck it still would be a good profit for many except I know how many people refinanced and used the equity as a cash cow only to see that they now have little equity!

Dummies!

Hmmm.. so, you sold a house that would SEEM to be about the same as the ones listed for $513K... but the people are listing them for $600K and now have brought them down to $525... yes, seems like they have a ways to go before they can sell.. and it looks like it will be lower than what you got for yours... so, congratulations!!

[youbet]

Originally Posted by brewer12345

Uhuh, but who regulates the banks?

Are banks actually making more profit on subprime loans? *Or do they wish more borrowers qualified for standard loans and are only offering subprime because demand for standard loans has decreased? *I haven't seen any numbers on this.

I find it interesting how individual Americans, the borrowers, seem to be skating free of responsibility for their own predicaments. *Of course, how could the Fed, or anyone else, make a statement that would place the blame for people's situations squarely in their own laps? *That would be way too unpopular............. * :P

I wonder today, who would get the blame for the bubble in tulip prices in the prior century.......the famous "tulipmania" scenario. *What government agency is actually responsible for people's stupidity and greed?

[newguy88]

Originally Posted by Texas Proud

Hmmm.. so, you sold a house that would SEEM to be about the same as the ones listed for $513K... but the people are listing them for $600K and now have brought them down to $525... yes, seems like they have a ways to go before they can sell.. and it looks like it will be lower than what you got for yours... so, congratulations!!

They were bigger homes but very similar, if you have ever seen a toll brothers development they are all 4 bedroom 2.5 bath centerhall colonials, these two I listed have an extra room downstairs but if you were to look at them next to my old house they look similar.

We priced the place to sell, never had any home equity lines of credit never refied and took cash out.

We sold they have not, I know what that 525 guy paid for his house 331. He also bought two fancy cars in the last 4 years.

[Jay_Gatsby]

Originally Posted by newguy888

Heck it still would be a good profit for many except I know how many people refinanced and used the equity as a cash cow only to see that they now have little equity!

Dummies!

This is one of the major problems associated with a housing bubble burst. Significant appreciation led to significant paper equity, which then led to people using their houses as piggy banks.

[newguy88]

Originally Posted by youbet

Are banks actually making more profit on subprime loans? Or do they wish more borrowers qualified for standard loans and are only offering subprime because demand for standard loans has decreased? I haven't seen any numbers on this.

I find it interesting how individual Americans, the borrowers, seem to be skating free of responsibility for their own predicaments. Of course, how could the Fed, or anyone else, make a statement that would place the blame for people's situations squarely in their own laps? That would be way too unpopular............. :P

I wonder today, who would get the blame for the bubble in tulip prices in the prior century.......the famous "tulipmania" scenario. What government agency is actually responsible for people's stupidity and greed?

I saw the mortgage that the people who bought my house have. They bought my place at 513,000 put 135,000 down he sold his place she is trying to sell her place below what she owes. A 387,000 mtg with a HELOC and some other new fangled things. I just shook my head and quickly signed the papers gavem the keys and said adios!

[brewer12345]

Originally Posted by youbet

Are banks actually making more profit on subprime loans? *Or do they wish more borrowers qualified for standard loans and are only offering subprime because demand for standard loans has decreased? *I haven't seen any numbers on this.

Much of the activity in this market is driven by the securitization markets. *Banks make the subprime loans, package them up, and sell bonds backed by the loans. *The difference between what it costs them to make the loans and what they can sell the bonds for is the profit. *Margins on subprime deals are far higher than on prime mortgage deals. *Since the banks keep little of the credit exposure to these loans, they are happy to do as much lending as they possibly can to feed the securitization machine.