5 ms·

I remember distinctly the moment I realized the housing bubble was going to end badly. I was wondering in the early 00's how house prices, more or less everywhe

I remember distinctly the moment I realized the housing bubble was going to end badly. I was wondering in the early 00's how house prices, more or less everywhere, could continue rising past what most people could actually afford to pay. I hadn't really being paying much attention to the financial world, but sometime in 2004 or so, I saw an ad on tv for a mortgage deal that seemed to make no sense. I looked it up and discovered they were selling a negative amortization loan. On late-night tv.

dfee 8y ago
I wonder that same thing today. To me, it feels like the bubble burst in 2007. But, that we're still here today, seems to indicate it didn't really pop, but instead it's a side-effect of another system. Recently in Southern California, listening to the local NPR affiliate, they were covering a candidate race where one candidate accused the other of not hearing his constituents: ~"House prices have fallen, and that's bad for our voters. I hear them, and he doesn't." I feel like housing in California is unsustainable: pricing, development, etc. What's strange is that the candidate doing the accusation was a Democrat. I assume he benefits from loose borders (more housing demand), but constituents who can't actually vote and get their voices heard (immigrants wanting affordable housing, not what begins to approach slum-lord style ghettos).
- criddell 8y ago
  > "House prices have fallen, and that's bad for our voters. I hear them, and he doesn't." There are a few things that are absolutely essential to life: housing, clothing, food are among the most basic. If the price of clothing or food increased at the same rate as houusing, people would be rioting.
  - marnett 8y ago
    oddly enough we aren't told that food or clothing are investments.
    - criddell 8y ago
      A house is an investment, housing is an expense. Even when you own your house, the cost of housing can go up.
- HillaryBriss 8y ago
  > "House prices have fallen ..." huh? where in Southern California? over what time period?
- aero142 8y ago
  I've got a working theory that I am bouncing around my head. It's basically thoughts about the efficiency of markets and their ability to price in all value provided. The biggest growth is in housing and education. Basically, if moving from Iowa to Silicon Valley will result in a net gain in income, then housing will adjust to consume as much of that gain as possible. If education will result in higher lifetime earnings, then the price of an education will rise to capture as much of this value as possible.
  - gnarcoregrizz 8y ago
    housing and education are also targets for federal subsidies
- zjaffee 8y ago
  I think the problem in California is that investors can go in and buy housing at unsustainable prices, and just rent it out, since their long term goal isn't to house themselves, but to have an asset that has a fixed return value at a near minimum, especially given the taxes hardly increase year over year.
Bombthecat 8y ago
In germany, the same thing is starting to happen. A week or so ago I had something like this ad in my Facebook feed. "no money, no problem, get your credit now!"
nickik 8y ago
And yet Australia and many other had and have high housing prices as well and they didn't have recession. So this oversimplified theory is really just your confirmation bias.
- mcguire 8y ago
  The theory is a bit oversimplified, but not incorrect given that the previous poster isn't alone in seeing the problem in the US, and the experiences of other countries. Why Australia wasn't involved is a different question. (http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/1301.0Chapter27092009%E2%80%9310 http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/1301.0Chapter...) "...and they didn't have recession." Yet. How much of Australia's economic growth is made up of financial shenanigans and the housing industry?
  - nickik 8y ago
    Arguing that Australia's 30 year history of no recession is build on 'financial shenanigans and housing' are the arguments of people who defend a theory that is not workable. Even were that so, why can Australia managed this 'shenanigans' but others can not. I agree with the Article, the Australian central bank did its job and they didn't have a crisis, the Fed was a disaster and the US suffered the consequences. The Fed however was 10x better then the ECB and that's why Europe is still not recovered.
    - bigger_cheese 8y ago
      I don't think it is correct to say Australia didn't have a crisis. I graduated in 2008 there were no jobs at all until about 2012 companies on the East Coast just stopped hiring. I know I lived through it. About 2/3's of my graduating class (Engineering) left the East coast to move West for work in the mining sector. Fly in Fly out was about all there was going it was tough times and hard lifestyle. Basically resources sector was only part of economy still functioning retail, manufacturing etc had huge contractions and we are still feeling the impact most of those lost jobs won't come back. Holden, Ford, Mitsubishi etc all those plants shut and left the country. The resource boom which was driven by Chinese demand for Iron ore + Coal propped up large parts of the economy. Lookup all the articles from treasury etc at the time "Two speed economy" was real. To say Australia was not affected by 2008 is a gross misstatement.

dfee 8y ago

I wonder that same thing today. To me, it feels like the bubble burst in 2007. But, that we're still here today, seems to indicate it didn't really pop, but instead it's a side-effect of another system. Recently in Southern California, listening to the local NPR affiliate, they were covering a candidate race where one candidate accused the other of not hearing his constituents: ~"House prices have fallen, and that's bad for our voters. I hear them, and he doesn't." I feel like housing in California is unsustainable: pricing, development, etc. What's strange is that the candidate doing the accusation was a Democrat. I assume he benefits from loose borders (more housing demand), but constituents who can't actually vote and get their voices heard (immigrants wanting affordable housing, not what begins to approach slum-lord style ghettos).

criddell 8y ago
> "House prices have fallen, and that's bad for our voters. I hear them, and he doesn't." There are a few things that are absolutely essential to life: housing, clothing, food are among the most basic. If the price of clothing or food increased at the same rate as houusing, people would be rioting.
- marnett 8y ago
  oddly enough we aren't told that food or clothing are investments.
  - criddell 8y ago
    A house is an investment, housing is an expense. Even when you own your house, the cost of housing can go up.
HillaryBriss 8y ago
> "House prices have fallen ..." huh? where in Southern California? over what time period?
aero142 8y ago
I've got a working theory that I am bouncing around my head. It's basically thoughts about the efficiency of markets and their ability to price in all value provided. The biggest growth is in housing and education. Basically, if moving from Iowa to Silicon Valley will result in a net gain in income, then housing will adjust to consume as much of that gain as possible. If education will result in higher lifetime earnings, then the price of an education will rise to capture as much of this value as possible.
- gnarcoregrizz 8y ago
  housing and education are also targets for federal subsidies
zjaffee 8y ago
I think the problem in California is that investors can go in and buy housing at unsustainable prices, and just rent it out, since their long term goal isn't to house themselves, but to have an asset that has a fixed return value at a near minimum, especially given the taxes hardly increase year over year.

Bombthecat 8y ago

In germany, the same thing is starting to happen. A week or so ago I had something like this ad in my Facebook feed. "no money, no problem, get your credit now!"

nickik 8y ago

And yet Australia and many other had and have high housing prices as well and they didn't have recession. So this oversimplified theory is really just your confirmation bias.

mcguire 8y ago
The theory is a bit oversimplified, but not incorrect given that the previous poster isn't alone in seeing the problem in the US, and the experiences of other countries. Why Australia wasn't involved is a different question. (http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/1301.0Chapter27092009%E2%80%9310 http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/1301.0Chapter...) "...and they didn't have recession." Yet. How much of Australia's economic growth is made up of financial shenanigans and the housing industry?
- nickik 8y ago
  Arguing that Australia's 30 year history of no recession is build on 'financial shenanigans and housing' are the arguments of people who defend a theory that is not workable. Even were that so, why can Australia managed this 'shenanigans' but others can not. I agree with the Article, the Australian central bank did its job and they didn't have a crisis, the Fed was a disaster and the US suffered the consequences. The Fed however was 10x better then the ECB and that's why Europe is still not recovered.
  - bigger_cheese 8y ago
    I don't think it is correct to say Australia didn't have a crisis. I graduated in 2008 there were no jobs at all until about 2012 companies on the East Coast just stopped hiring. I know I lived through it. About 2/3's of my graduating class (Engineering) left the East coast to move West for work in the mining sector. Fly in Fly out was about all there was going it was tough times and hard lifestyle. Basically resources sector was only part of economy still functioning retail, manufacturing etc had huge contractions and we are still feeling the impact most of those lost jobs won't come back. Holden, Ford, Mitsubishi etc all those plants shut and left the country. The resource boom which was driven by Chinese demand for Iron ore + Coal propped up large parts of the economy. Lookup all the articles from treasury etc at the time "Two speed economy" was real. To say Australia was not affected by 2008 is a gross misstatement.