The banks that wrote the mortgages should take some of the pain now.

[hedgehog]

I live in a small town. If I'd gone to my local banker and asked for a loan of $500,000 to buy my house, he would have laughed me out of his office. He knows what property is worth around here. But look what happened in the boom areas, California, Nevada, the South East: instead of looking at the actual value of the housing, the banks and mortgage companies were glad to feed the inflation. They were perfectly happy to finance houses at 4 or 5 times a reasonable price. Individuals were caught between a rock and a hard place. They could pay exorbitant rents or they could take out a mortgage and pay the same amount against a house they owned. And prices were escalating by the month.

If the banks had refused a mortgage the first time someone had offered twice what a house was worth, there would not have been this insane escalation in housing prices.

[Laelth]

1. I fully agree. n/t

:dem:

-Laelth

[sinkingfeeling]

2. Gee, why didn't I ever hear of this in economics class? So much for supply and demand determing

price.

[hedgehog]

4. What I am saying is that the banks financed the bubble.

If they had not written the mortgages for several times the actual value of the houses, no one could have sold them at those prices.

Was there an actual shortage of homes, or was it a case of a shortage of homes at a decent price?

[sinkingfeeling]

5. Who determines the 'actual value'? Real estate is bought and sold based on appraisals of

recently sold like properties. In places like Southern California, Las Vegas, and Arizona, there were extremely strong demands. If not why would homes in some areas have bidding wars and multiple offers within hours of going on the market?

[hedgehog]

6. The extremely hot market in those areas was to the benefit of everyone involved

except the people looking for a place to live. Real estate agents, builders, mortgage brokers and the banks all made a bundle on a market that was built on the notion that if prices were bad today, they would be out of reach tomorrow. All of this went on to the backs of the people making the monthly payments.

As measure of how artificial this market bubble was, look at all the foreclosed houses sitting empty. If the market was truly that tight, wouldn't people be bidding on those houses now?

My proposition is that there was never an actual housing shortage, just the illusion of one created by the bankers, builders and real estate agents.

[xiamiam]

8. appraisals by the lenders and paid for by the borrowers..almost always the lenders appraisrers..nt

[dkf]

3. I'd say four or five times was an exaggeration.

If prices are down 50%, that would be two times. Unless you are arguing that housing needs to go down another 50% from here. That would probably crash our economy after all.

[w4rma]

7. Prices should go back to 1990 rates which were 4 to 5 times lower. (nt)

[xiamiam]

9. that will happen..no stopping the foreclosures unless the bankruptcy bill passes..