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re: Why were house prices going up like crazy during the housing bubble?
Posted on 9/18/17 at 6:36 pm to Teddy Ruxpin
Posted on 9/18/17 at 6:36 pm to Teddy Ruxpin
Thanks.
As far as the market correcting itself, I mean why wasn't it a slow correction rather than a crash? Was it the corrupt banks propping the market up?
As far as the market correcting itself, I mean why wasn't it a slow correction rather than a crash? Was it the corrupt banks propping the market up?
Posted on 9/18/17 at 6:41 pm to Langland
quote:
As far as the market correcting itself, I mean why wasn't it a slow correction rather than a crash? Was it the corrupt banks propping the market up?
This was probably more complicated in reality but let's just do an exercise.
Let's say we're handing out loans with 5 year teaser rates. During this period, people are bidding up houses.
Do you see how the bidding up of the price from demand could go up before the consequential downward pressure from default is realized five years down the road?
Can you see how that pressure would start to come all at once, not only from those failing on their mortgages, but from potential solvent borrowers who realize the prices are tumbling and stay away. Demand for housing would drop exponentially. Fear rises precipitously. It isn't a measured withdrawal in this situation, it's a stampede.
This post was edited on 9/18/17 at 6:51 pm
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