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re: Why were house prices going up like crazy during the housing bubble?
Posted on 9/18/17 at 6:41 pm to Langland
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
Posted on 9/18/17 at 6:56 pm to Teddy Ruxpin
Thanks again. You're educating the Langland.
Yes, I can see that. But the thing that bothers me is that the people who were paid to see it, either didn't see it coming or didn't give a frick.
Yes, I can see that. But the thing that bothers me is that the people who were paid to see it, either didn't see it coming or didn't give a frick.
Posted on 9/18/17 at 7:32 pm to Teddy Ruxpin
I have a hunch "they" could see that the market was slowing (correcting itself), but kept it going by introducing the teaser rates and giving loans to whoever had a pulse. To me, this is an indicator that "they" knew what they were doing. They just redlined that engine until it blew.
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