This was a great article and really clarified the truth about why our housing markets have declined. I agree with the article completely. The housing market has declined and hopefully it has hit rock bottom, so the market and the economy can start to recover. I think a big reason to why the market has seen such a drop in prices and property tax revenue is that property tax has really influenced the market, and its a tax that young and old people find as a burden. For that reason, I find that young people avoid the housing market until later in life and focus on apartment living, therefor contributing less in property tax. Another reason for the drop in buying is that people simply cannot afford a house or a new house, and if someone already owns a house they choose to remodel as their first option. The only positive is that appliance stores are still seeing purchasing for their companies. I hope for the best and I think as we see higher employment it will be correlated with greater purchasing power in the housing market.
The housing market collapse was not the consumer's fault as many pundits like to make us believe. It was the problem of big commercial banks creating derivatives that were highly unregulated,along with predatory lending, which they call sub-prime lending. These derivatives were speculative bets that the housing market prices would continue to go up forever. Once the housing market bubble burst, all the derivative speculators started to lose money. This, along with credit default swaps, whatever that means, created too much counter party risk and led to all the major banking and insurance firms to be dependent on the success of their competitors. So when one firm went down, all the firms would go down, unless the federal government bailed them out, leaving out the average consumer who need a place to live, who never bet on financial derivatives. To avoid another housing collapse, a highly regulated and taxed financial derivatives market is needed.
Sasha and Arron both make interesting points and I believe that both points are necessary to understanding the decline of the housing market. Sasha's point on the younger generation moving towards renting as an alternative to owning is dead on. The younger generation seems the be wising up and realizing that it is not a necessity to be in debt by owning a home.
Aaron did a very good job breaking down the banks roles in the housing crisis. To put it simply, banks were giving out risky loans that they should have never allowed. However, Fannie Mae and Freddi Mac should not be forgotten about in this analysis. They pushed for these loans and were a major player in the resulting crisis.
This was a great article and really clarified the truth about why our housing markets have declined. I agree with the article completely. The housing market has declined and hopefully it has hit rock bottom, so the market and the economy can start to recover. I think a big reason to why the market has seen such a drop in prices and property tax revenue is that property tax has really influenced the market, and its a tax that young and old people find as a burden. For that reason, I find that young people avoid the housing market until later in life and focus on apartment living, therefor contributing less in property tax. Another reason for the drop in buying is that people simply cannot afford a house or a new house, and if someone already owns a house they choose to remodel as their first option. The only positive is that appliance stores are still seeing purchasing for their companies. I hope for the best and I think as we see higher employment it will be correlated with greater purchasing power in the housing market.
ReplyDeleteThe housing market collapse was not the consumer's fault as many pundits like to make us believe. It was the problem of big commercial banks creating derivatives that were highly unregulated,along with predatory lending, which they call sub-prime lending. These derivatives were speculative bets that the housing market prices would continue to go up forever. Once the housing market bubble burst, all the derivative speculators started to lose money. This, along with credit default swaps, whatever that means, created too much counter party risk and led to all the major banking and insurance firms to be dependent on the success of their competitors. So when one firm went down, all the firms would go down, unless the federal government bailed them out, leaving out the average consumer who need a place to live, who never bet on financial derivatives. To avoid another housing collapse, a highly regulated and taxed financial derivatives market is needed.
ReplyDeleteSasha and Arron both make interesting points and I believe that both points are necessary to understanding the decline of the housing market. Sasha's point on the younger generation moving towards renting as an alternative to owning is dead on. The younger generation seems the be wising up and realizing that it is not a necessity to be in debt by owning a home.
ReplyDeleteAaron did a very good job breaking down the banks roles in the housing crisis. To put it simply, banks were giving out risky loans that they should have never allowed. However, Fannie Mae and Freddi Mac should not be forgotten about in this analysis. They pushed for these loans and were a major player in the resulting crisis.