Can someone explain this to me?

Also, this article on Yahoo stated that Bernanke will buy long-term bonds, thereby pushing rates down. Did they mean to say yields? How can Ben buying bonds push down the coupon on a bond?
 
My guess would be mortgage bankers. And supply and demand.

Prior to WWII there were very few people with mortgages. Couples saved their money or borrowed from family to buy their first home, stayed there until it was paid for, and passed it on to their kids.

As years went by and more money became available for people to borrow, more people bought homes, or traded up for bigger homes. Look what happened to housing prices from 2002 to 2007. Homes that sold for 200k in '02 were going for 2-5x that price in 2007.

The reason, IMHO, is the "easy money" that was available during the sub-prime bubble. Interest-only ARMs made it possible for lifelong renters to become buyers, and "flippers" were all the rage. We are now seeing the effects of the bubble bursting, and the homes that were sold for $500k five years ago are selling for one-tenth that price today.

Supply and demand, the only thing I remember from the economics courses I took in college. :p
 
Quote from Gubinec:

1970 --- average house cost 25K. Average income --- 10K.

2000-2010 --- average house costs 300K. Average income --- 35K.

What went wrong?
More...

Don't dwell on the past, once you figure out what went wrong there's no one to fix it anyways.

Meanwhile, what does mean for the future? No one to buy those average 300k houses. Stay tuned when the average price of the house goes to zero and 35k is not enough to support the school and property taxes. Or 35k is enough to pay the taxes the insurance, garbage pu, water and utilities with none left over for the Principle and interest.
 
Quote from Gubinec:
I guess I know the reasons for this, but I also want opinions from knowledgeable people.

1970 --- average house cost 25K. Average income --- 10K.

2000-2010 --- average house costs 300K. Average income --- 35K.

What went wrong?
More...
Leverage...
 
Quote from Gubinec:

What went wrong?
More...

Gov't got involved, guaranteed loans, and actively promoted debt-based housing finance. Therefore, they drove the price of houses up.

Same thing that happened to college tuition. Too much loan money floating around, too many kids and families buying "education" on credit. Colleges and Universities and the banks ain't gonna leave that money on the table... If Joe Schmoe can get a $20k student loan, guaranteed by the gov't, to study Art History, then the entry price for a year of Art History "education" is going to be $20k. No one is going to leave that money on the table... and all Joe Schmoe has to do is sign some papers, and he can smoke weed for 4 to 6 years as he "learns" Art History.
 
First off...Average person today makes 46k per year not 35k and during the boom years average income was over $50k. And I dont believe that other statistic is right that the average house costs $300k now. It was $177k in jan 2011.
http://www.kiplinger.com/magazine/archives/2011/01/when-home-prices-will-head-up.html

Also, the avg home size in 1970 was 1,400 sq ft. Today its 2,300 sq ft, so you have to take into account the cost to build a bigger house.

So I think if you use those actual numbers (2.5 times $46k then multiply a house that is 64% bigger) and the number comes out to $188k for home prices which is pretty much in line with what they are now.
 
What BUBBLE ben bernanke did over the last few years was to keep housing prices propped up, meaning right this second housing prices are still way overvalued....of course most will laugh and disagree, but housing prices are still 30-50% overvalued. BUBBLE ben bernanke thinks he is going to save the housing market by artificially driving rates lower, HAHA. First off with over 25 million people are underemployed and nearly 46 million live in poverty, who is going to take wonderful advantage of buying a new house?? No one because no one can apply for these loans....no one has a job or the savings to put down, and even those who might have something to put down are afraid of losing their job, on top of that the cost of living is skyrocketing between utilities, taxes, insurance....and add the fact that banks have made it a 1000X harder to purchase a new house today than just 3 short years ago. This housing crisis has many, many, many years to go!
 
You must log in or register to reply here.
Back
Top