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A friend of mine does financial software modelling that is used in a number of major banks. According to him these models have predicted a major crash for the l
by mixmax 18y ago
A friend of mine does financial software modelling that is used in a number of major banks. According to him these models have predicted a major crash for the last couple of years. They weren't able to see when the crash would occur, but they could see that certain relationships such as household income/mortgage payments were diverging further and further from a historical mean.
- pasbesoin 18y agoJust observing the property value increases in my area made me nervous. I could observe no inherent basis for their magnitude. Housing was experiencing a surge not reflected in the broader economy; it was feeding upon itself. The penultimate "house of cards". There was no sustaining model for the demand. The population wasn't increasing that rapidly, and people's productivity (or earnings) wasn't rising in a fashion to enable them to afford to occupy an ever increasing quantity of living space.
- allenbrunson 18y agonitpick: the word "penultimate" means "next to last."
- pasbesoin 18y agoThanks. Guess I'm getting a bit sloppy in my phrasing. Or maybe it was my subconscious? If so, I'm not sure I want to know / learn what is the ultimate house of cards. The current one is already proving challenging enough for me. ;-)
- gamble 18y agoInterest rates were coming down, particularly since 2001. Given that people tend to size their house purchases to match the monthly payment they can afford, you would expect home prices to rise as interest rates fall. Whether that's sustainable in the long term is another question.