This is part of the problem with the American housing industry. How did it become "normal" to borrow 4/5ths of the value of a home? It didn't used to be that

This is part of the problem with the American housing industry. How did it become "normal" to borrow 4/5ths of the value of a home? It didn't used to be that way. If you look at average loan-to-value ratios over the last 40 years, they've consistently gone up. Same with the home value to income ratio. Home prices have appreciated much more quickly that they should have based on fundamentals of the economy, propped up by government incentives, cheap money sloshing around, and an oversized mortgage industry. Ultimately, what we really need is to go back to a system where people can actually afford the homes they live in. The vast majority of Americans, whether they "own" or "rent," are still renters with no real chance of ever actually owning their home outright. If that perception changed, prices would come down, and we'd eventually get back to a system where you could buy a home for 2X your annual income. The problem with a return to a sane system is that it would bury existing homeowners, and we aren't willing to accept the pain in the short run. We need to artificially inflate housing prices in order to allow people to sell their homes, keep the economy functioning etc. So, in short, we're stuck. http://www.doctorhousingbubble.com/wp-content/uploads/2013/02/HouseholdPercentEquityQ32012.jpg http://www.doctorhousingbubble.com/wp-content/uploads/2013/0...