Stardust, there are maitrix of reasons why macro economic and related social changes take place. I highlight only two significant ones. I assure you that the money made by lenders is not the issue, while the role of availability of debt and how the availabilty of debt effects perceived collateral asset value is a significant factor on why and how things changed; it is integral in the process of inflation...but that is not becuase lenders make money...they make money becuase they supply credit when it is demanded....and they don't always make money.
Just to highlight other issues that sound in the general thoughts of this thread...consider how inflation changed the idea of what a house was useful for....how did tax changes on real estate gain effect behavior with regard to investment in housing? Consider the effect of changes in land use laws in the cost of housing and consider how the increased cost of lots drives the decision on what sort of house to build. Consider the regulatory burden on the cost of a new house compared to what it was in the 1950's...almost 30% of housing cost is driven by change in building codes, land use regulation, environmental regulation, septic, well and energy system regulations. Basic house material costs have not gone up that much (and new materials and methods of assembly have arguably reduced the cost of the 'stick and brick' cost of the house...what has gone up is the cost of the 'right to build' and the cost of 'approved lots'...this in turn has driven larger house sizes that are comensurate, and profitable to produce considering the cost of the land.
All of this was supported by a culture of inflation and tax subsidy that mislead middle class investors into thinking that housing was an asset suitable for thier savings investment, so they leveraged up in the acquisition of the largest house they could qualify to own...in the hopes of achieving appreciation. Housing debt was specifically subsidized by the tax code; as was capital gains from housing appreciation. The demand for housing leverage pushed up home prices and financial invovation to provide that leverage...all of these issues and others not mentioned were at play. People held their houses as savings acounts where they could use homequity financing to make untaxed withdrawals to fund education and where the eventual sale with no capital gains tax would provide the basis for retirement...problem was that the idea that a house was an asset was a lie.
Or, consider in the case of 'Women at Work'...the ivention of the birth control pill...hardly a tax issue but nonetheless a significant factor in the change of the charactor and form of family life and culture. Do you think that the aggregate move of women out of the home may have had some impact on the quality of education and care of children? Again all these economic, technological and cultural factors interact in a complicated maitrix with multiple feed exogenous feed back mechanisms that are incredibley complicated and only understood after the fact as 'unforseen consequences'. This is probably the same as it ever was with regard to change and the march of history.
Just to highlight other issues that sound in the general thoughts of this thread...consider how inflation changed the idea of what a house was useful for....how did tax changes on real estate gain effect behavior with regard to investment in housing? Consider the effect of changes in land use laws in the cost of housing and consider how the increased cost of lots drives the decision on what sort of house to build. Consider the regulatory burden on the cost of a new house compared to what it was in the 1950's...almost 30% of housing cost is driven by change in building codes, land use regulation, environmental regulation, septic, well and energy system regulations. Basic house material costs have not gone up that much (and new materials and methods of assembly have arguably reduced the cost of the 'stick and brick' cost of the house...what has gone up is the cost of the 'right to build' and the cost of 'approved lots'...this in turn has driven larger house sizes that are comensurate, and profitable to produce considering the cost of the land.
All of this was supported by a culture of inflation and tax subsidy that mislead middle class investors into thinking that housing was an asset suitable for thier savings investment, so they leveraged up in the acquisition of the largest house they could qualify to own...in the hopes of achieving appreciation. Housing debt was specifically subsidized by the tax code; as was capital gains from housing appreciation. The demand for housing leverage pushed up home prices and financial invovation to provide that leverage...all of these issues and others not mentioned were at play. People held their houses as savings acounts where they could use homequity financing to make untaxed withdrawals to fund education and where the eventual sale with no capital gains tax would provide the basis for retirement...problem was that the idea that a house was an asset was a lie.
Or, consider in the case of 'Women at Work'...the ivention of the birth control pill...hardly a tax issue but nonetheless a significant factor in the change of the charactor and form of family life and culture. Do you think that the aggregate move of women out of the home may have had some impact on the quality of education and care of children? Again all these economic, technological and cultural factors interact in a complicated maitrix with multiple feed exogenous feed back mechanisms that are incredibley complicated and only understood after the fact as 'unforseen consequences'. This is probably the same as it ever was with regard to change and the march of history.