Why blame the Fed? The low interest rates that made it easy to buy homes (driving up the price) also should have made it cheap to build homes which would have driven down the price. It was local regulations that prevented building homes.
Wealthy old homeowners tend to control those.
Do you know the situation depicted from the movie "Up" where there's a house surrounded by parking lots of malls and stuff? That's what low regulation building gets you. I'm not talking about NIMBYs, I'm talking about lax zoning laws.
not sure I understand how you came to such conclusion..
(I don't believe this, but I do believe it is the most common unstated thought on the subject so I feel compelled to get it on record.)
Like, at all? Or for individuals? Maybe only for poor individuals?
The most obscene part of this is when asset-holders try to blame the problem on their victims (the people who must pay higher prices for the pumped assets). The leverage is not generosity, it is a curse.
How are the latter, those procuring assets, not also asset holders?
Eventually it implodes. People who got in early on the ponzi walk away with windfalls but the last generation is the largest generation and it gets to hold the bags.
You're describing a housing-price decline as if it didn't happen less than two decades ago. It's painful, because of the leverage. But a lot of Americans are uniquely equity rich in their homes right now. The missing pieces in your equation are (a) default, which wipes out the debt and (b) real economic growth. It's a tragedy that so much of (b) gets funnelled into real estate prices, but that's a policy choice and far from unsustainable in general. (Versus at specific price points.)
Or maybe replacing our workforce with robots is actually deflationary enough to make it different this time. Who knows.
Zero-down, no-income-no-credit-check mortgages, OK yeah those were a problem.
Credit cards are the degenerate financial product that shouldn't exist, if anything is.
Using the word "responsible" to describe something that is good for an individual but bad for society is... a choice.
People don't live in houses on interest only mortgages, they use them as leveraged investment vehicles to speculate, rent out, and then roll them into even more leverage as time goes on.
I have nothing against classic mortgages where you pay the principle off, I have one myself, but I will maintain my opinion that interest only mortgages shouldn't exist despite the unpopularity.
But even on a traditional mortgage, in the early years the vast majority of the payment is interest. How much lower is the monthly payment on an interest-only loan? Are they easier to qualify for? Are the rates the same, or higher than, a traditional mortgage?
I'm not sure I'd want to ban types of financing for types of properties, that seems heavy-handed.
They are normally inaccessible to people who don't already own their own property, even more so by the nature of the higher than usual deposit required, so it's an investment vehicle for already well off people to leverage more money into property and extract money from tenants
It puts upwards pressure on housing prices because you don't just get the family that wants to own a home or the occasional landlord who wants to own and rent out a second holiday house, it's a purely synthetic financial product that lets you take a house out of the market and arbitrage on the difference between your interest payments and the tenant's rent
It is not uncommon for people like this to own tens or hundreds of properties in their portfolio this way, and these are the people crying first and loudest when interest rates go up because their rental yields can no longer cover the interest only payments on the houses they "own". Whatever happened to being on the hook for bad investment decisions? They think they should get special treatment because they're providing a so called service to the tenants
Like why that sort of insanity was possible in first place. There should be something going towards principle. As not doing it means that increasing rates can be destruction.