Originally Posted by
sickboy
http:///forum/post/3164331
So you have addressed the issue of unqualified home buyers, but that is not the whole story of the housing bubble, and why I disagree that the whole thing is the governments fault. I agree that people that shouldn't have been able to buy houses were allowed to because of what the gov't did. however, there was unreal "increases" in property valuation all over the country (mostly on the coasts, specifically but not inclusively california, florida, and nevada). These were not the home buyers you are speaking of. These are upper-middle class expensive housing. These people would have gotten financing regardless of what the government did. And every year there was major appreciation (hence a bubble), and since the people were now "wealthier" they could borrow more and more, and then pop....there goes the equity and you are buried in debt, completely insolvent. People start losing their homes, which causes the neighbors valuations to go down, and on down the line.
This is why I say the government did not create the bubble but aided it. The biggest loss in equity did not come from homes that would have been under the "equal housing laws", but large $600,000-900,000 being priced incorrectly due to an "every increasing market value". Coincidentally, a similar sized home cost a third of the price in the mid-west, which you could argue is priced more correctly....
You're using some logic. That makes sense if you're not talking credit markets. You can make a crapload of money and still have bad credit. You could take my dad for instance. He had horrible credit, but was still able to borrow money for a 200k house. Just because you're able to get a mort-gage for a 500k dollar house, doesn't mean you weren't a high risk case.
Basically you're making a connection that should be there, but is not. When we say bad credit, you would think that we'd be talking lower priced houses. But the reality was there were sub-prime loans for a huge range in housing. For people that otherwise would have been priced out of the market.
I can't find it now, but I saw a graph that had inflation, then a second line for housing prices. And you want to know what is interesting. Housing prices were VERY closely followed inflation, until the government started underwriting mort-gages and subsidizing interest rates...
Heck, when I was looking for a house, they were trying to get me to borrow 200k for a house. And last years tax return we did for free online (so that gives you a ceiling.)