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Housing Affordability

by wchurchill Thu Apr 5th, 2007 at 09:29:27 PM EST

I've been doing some analysis in this area over the past several months, and have found some reports and internet sites that have been very interesting to me.  Since we discuss issues around housing, housing crashes from time to time, I thought one report I found might be interesting to some of you.  It didn't surprise me to find that there has been a sharp change in housing affordability over the last several decades.

Affordability is defined as developing a ratio of the median housing price to the median income.  This affordability ratio shows that the most impacted place by this trend is Australia, where the median housing price is an incredible 6.6 times the median income.  As you'll see in the report, going back several decades this ratio was normally for these countries more like 3 to 1.  (One drawback to this study is that it only includes the English speaking countries.  I'm continuing to look for a broader study, but with the same level of detail as this report.  I would appreciate it if anyone could refer me to other reports you may have seen.)

EXECUTIVE SUMMARY- The 3rd Annual Demographia International Housing Affordability Survey expands coverage to 159 major markets in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States. The Demographia International Housing Affordability Survey employs the "MedianHouse Price to Median Household Income Multiple," ("Median Multiple") to rate housing affordability (Table ES-1).

Table ES-1
Demographia Housing Affordability Ratings
Rating Median Multiple
Severely Unaffordable 5.1 & Over
Seriously Unaffordable 4.1 to 5.0
Moderately Unaffordable 3.1 to 4.0
Affordable 3.0 or Less

In recent decades, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes. This historic affordability relationship continues in many housing markets of the United States and Canada. However, the Median Multiple has escalated sharply in Australia, Ireland, New Zealand and the United Kingdom and in some markets of Canada and the United States.

The report verifies an intuitive feeling that I had, that the US has comparatively very affordable housing.  However, it is a nation of extremes, as some of the California housing markets, for example, rank at the top in terms of unaffordability.

2006 Housing Affordability Ratings

The most pervasive housing affordability crisis is in Australia, with an overall Median Multiple of 6.6. Affordability is only marginally better in New Zealand (6.0) Ireland (5.7), and the United Kingdom (5.5). On the other hand, the national Median Multiple in Canada is 3.2, indicating that housing is one-half as expensive relative to incomes as in Australia. The national Median Multiple in the United States is 3.7.

Least Affordable Markets: The least affordable markets are generally in California, Hawaii, the US East Coast, Australia, the United Kingdom, New Zealand and Vancouver. The least affordable market is Los Angeles & Orange County, with a Median Multiple of 11.4, far above the "severely unaffordable" threshold of 5.1 and approaching four times the 3.0 "affordability" standard. The Median Multiple is 8.5 in Sydney, 8.3 in London, 7.7 in Vancouver, and 6.9 in Auckland. All of the 25 least affordable markets are rated "severely unaffordable" (Table ES-2). Ireland's only surveyed market, Dublin is also rated severely unaffordable, at 5.7.

Affordable Markets Remain: At the same time, 42 markets remain "affordable." Seven of the "affordable" markets are in Canada and 35 are in the United States. The most affordable markets are Regina, Fort Wayne and Youngstown. Some of the fastest growing markets in the survey remain "affordable," such as Dallas-Fort Worth, Houston, Atlanta and Oshawa (Table ES-3).

The US can be an incredibly expensive place to live, or an incredibly inexpensive place to live--all depending on choices.  As this report shows, there are nice cities in the US (not like New York, Paris, London of course) where the median housing price is only 2 times the median annual income.  This is just one of the factors that leads to such diversity in the US on so many levels--including political, social, and economic levels.

I thought some of you might find this an interesting report, or at least reference.

wchurchill, I will see if I have anything that may be of interest to you tomorrow.
In the mean time can I complain a little bit here...

I live in Santa Barbara and until recently the median housing prices was around 1 million dollars!

I think the biggest impediment to having affordable housing is local restrictions and regulations.

Anything above 40% of take home pay tends to be too much of strain on working families.

Rutherfordian ------------------------------ RDRutherford

by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Fri Apr 6th, 2007 at 02:38:20 AM EST
I was listening to a feature on NPR yesterday (rebroadcast in Finland) about the US sub-prime mortgage market. An expert was predicting that between 20 - 30% of low-income home owners face foreclosure in the near future. That seems an incredible and politically volcanic number.

You can't be me, I'm taken
by Sven Triloqvist on Fri Apr 6th, 2007 at 05:24:49 AM EST
I was listening to a feature on NPR yesterday

I am, on behalf of my country, deeply sorry for exporting that, Sven.

It's, indeed, horrifying, but perhaps that volcanic number is a necessary evil to get Congress to pay attention to that idiotic bankruptcy bill the GOP passed a year or two ago with cover from folks like Joe Biden.  I think the likely outcome will involve further bankruptcy reform, but the Dems should try to do everything they can to keep people out of foreclosure.  Some hefty tax cuts, along with other breaks that simply don't come to mind, to the working class would be a very good idea if this 20-30% is the true range.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Apr 6th, 2007 at 11:09:18 AM EST
[ Parent ]
I always try to be very catholic in my media. For instance, the rebroadcast channel  I listen to in Helsinki (Yle Mondo 97.5) has programming from around the world, including ABC (Australia State), Africa - Rise and Shine, BBC World, NPR, DW, Chinese state radio, Yle Russian service, Italian radio, and state broadcasters in Danish and Norwegian (Swedish language has own channel in Finland).

I see no point in only getting one point of view ;-)

Here's a typical day schedule from YLE Mondo:

00.00         CBC: The World at Six.
00.30         CBC: CBC News followed by As It Happens.
02.00         NPR.
03.00         NPR.
04.00         NPR.
05.00         Dobro pozhalovat na volnu YLE Radio Finljandija.
05.01         Novosti Russkoj sluzhby YLE Radio Finljandija.
05.05         Obzor pressy.
05.08         Priroda i chelovek.
05.19         O chem govorit vsja Finljandija.
05.24         Do vstrechi na volne.
05.27         Selkouutiset.
06.00         NPR
07.00         BBC: The World Today.
07.30         YLE News in English.
07.36         Dobro pozhalovat na volnu YLE Radio Finljandija.
07.37         Novosti Russkoj sluzhby YLE Radio Finljandija.
07.41         Dobroje utro.
07.52         Selkouutiset.
08.00         Deutsche Welle.
08.30         RFI.
08.55         YLE News in English.
09.00         BBC.
09.30         RNE Todo Noticias.
10.00         Radio Australia.
10.59         BBC Novosti po-russki.
11.05         Dobro pozhalovat na volnu YLE Radio Finljandija.
11.06         Novosti Russkoj sluzhby YLE Radio Finljandija.
11.10         Ostanovka Finljandija.
11.30         NPR-Washington.
13.00         Danmarks Radio.
13.30         SABC.
14.00         Deutsche Welle.
14.30         RFI.
15.00         Radio Vaticana.
15.30         NPR
16.00         BBC.
17.00         NPR: The Diane Rehm Show.
18.00         BBC.
19.00         NPR.
20.00         Deutsche Welle.
20.30         RNE Todo Noticias.
20.55         YLE News.
21.00         RFI.
21.59         BBC Novosti po-russki.
22.05         Dobro pozhalovat na volnu YLE Radio Finljandija.
22.06         Novosti Russkoj sluzhby YLE Radio Finljandija.
22.10         Ostanovka Finljandija.
22.30         NPR.

You can't be me, I'm taken

by Sven Triloqvist on Fri Apr 6th, 2007 at 11:58:59 AM EST
[ Parent ]
Do you sleep...eat...use the restroom?

Rutherfordian ------------------------------ RDRutherford
by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Fri Apr 6th, 2007 at 12:41:23 PM EST
[ Parent ]
LoL - no - it just depends on when I am driving. - which is when I mostly listen to non-music radio

You can't be me, I'm taken
by Sven Triloqvist on Fri Apr 6th, 2007 at 05:46:05 PM EST
[ Parent ]
I'll make a few comments, but would stress this is an area that I do not know well.

First, it's my understanding that this segment is a very small part of the overall home mortgage market.  I forget the %'s I've heard, but they were definitely under 5%.  That is why most analysts I respect have laid out arguments as to why they think the chances of this spreading to an overall credit crunch in the US are close to non-existent.

Second, it's not just low income people that use this mortgaging source.  Many people at all income levels in the US screw up their credit rating.  when they are young, just not paying attention to credit cards for example.  my impression is a lot of the people having these mortgages are fairly high income, certainly above average, and willing to roll the dice.  In my own experience, I know a number of families with low incomes who own their homes.  Obviously this is not a big sample size, but those families are incredibly conservative in the way they manage their money--with no exceptions.  They wouldn't think of buying a home without at least 20% down.

But I really don't know.  It would be interesting if this person had quoted any data sources for his comments and forecasts, so we could look at it and analyze for credibiliity.

by wchurchill on Fri Apr 6th, 2007 at 01:50:08 PM EST
[ Parent ]
Even 5% is many millions of people, is it not?

You can't be me, I'm taken
by Sven Triloqvist on Fri Apr 6th, 2007 at 05:48:44 PM EST
[ Parent ]

Bloomberg item:

Political pressure on the government and regulators to intervene has increased as defaults on subprime loans rose to a four-year high and foreclosures on all home loans rose to a record in the last quarter of 2006. As many as 2.4 million Americans may lose their homes because of the collapse of the subprime loan industry, said the Center for Responsible Lending, also part of the coalition, in testimony to Congress last month.

my bold

You can't be me, I'm taken

by Sven Triloqvist on Fri Apr 6th, 2007 at 05:54:14 PM EST
[ Parent ]
2.4 million is over twice the entire population of the Helsinki Metropolitan area - made homeless!

I can't believe this is a minor blip - this a a staggering crisis.

You can't be me, I'm taken

by Sven Triloqvist on Fri Apr 6th, 2007 at 05:57:30 PM EST
[ Parent ]
yes, I agree, that would be an incredible number.  I'm afraid this is an area that I just don't follow.  I will pay attention, from a social not a business perspective, now that I see the potential magnitude it could have at a personal level.

this is a generic principle that we sometimes have trouble with in the US.  we tend to want to leave choices to the individual, giving them that freedom to make a choice, and count on them to choose right or suffer the consequences.

an example from another area is in investing.  many years ago we had very limited regulation regarding investments.  some people invested in private companies, not on a stock exchange, and in some cases they were not sophisticated enough to understand the business and made poor investments, and in other cases they were outright swindled.  so legislation and regulations were put in to prevent this, and it certainly had to be changed.  but you have some unintended consequences, and today to make investments in private firms, private equity, venture capitalists, one has to be able to prove his financial sophistication, and prove he has quite a bit of money--I think it's $5 million in financial (not including your home) assets.  Now this legislation was needed and solved a serious problem.  but it does mean that for some of these risky, but potentially very lucrative, private investments, you have to be rich to participate.  and i would say that if you look at the big picture, it is the right thing to have done.

carry this down to home ownership.  a reaction to all of this might be something like requiring a 20% downpayment to by a house, and make that a law.  years ago banks wouldn't take less than 20%, so obviously it can be done.  but, other side of the coin, there are young families, upwardly mobile, from middle class or lower class backgrounds, that will find that they will have to wait  longer than they might like to get their first home.  today they can decide that they are going to work their tails off now, and hope they don't get real bad luck, and just make it work with a new home and 5% or less down.  so we may end up taking away from them that ability to decide on their own, and take the risk if they want.

and this may be the better decision from a society viewpoint.  if anywhere near 2.4 million people lose their home, I would think it should be changed.

but just trying to point out the two edged sword aspect of this, and in conjunction with what I perceive as American ideals of one should be able to make their own choices, one should be able to decide to take risks.

by wchurchill on Fri Apr 6th, 2007 at 06:36:36 PM EST
[ Parent ]
It  would seem to me that the sub-prime market should be the most regulated of all. Freedom of choice is all very well, but a rather bogus argument when considering the users of that market. The people who go to sub-prime lenders (and I am guessing here) are probably going to be people with a history of credit misuse or unpredictable future financial security. And, at the risk of sounding patronising, people who may not have the full education to make such a major choice.

Their choices are made in a media environment that does little to encourage savings, and a business environment that is only interested in fufilling quotas regardless of the consequences to their clients.

I agree on th two-edged sword, but the blade is very dull on one side.

I think you would agree that offering a crate of whiskey or a box of bottled water to a teenage party, and expecting them to make the right choice or suffer the consequences, is hardly Freedom of Choice.

There is an ideal world of freedom in which people make rational judgements, but in the real world it is intersected by marketing. Marketing, by its very nature, is against Freedom of Choice. Marketing wants to limit your choice. Marketing wants you to buy 'this one' not any other one.

This - to me - is one of the great paradoxes of Capitalism.

You can't be me, I'm taken

by Sven Triloqvist on Fri Apr 6th, 2007 at 07:38:02 PM EST
[ Parent ]
you make excellent points on sub prime space and I agree with all of that.

I actually see, in the broader picture, marketing differently.  Marketing is the tool that gives me the consumer all of the choices that I have.  So take cars for example.  Magazine and TV ads make me aware of all the choices I have.  and it's up to me to choose from amongst them.

in sub prime, marketing keeps the consumer aware of the competitive offers among vendors of subprime--who might have the best terms.

but then again, to your point, on subprime it probably makes the overall prospects of owning your own home more appealling, and keeps that thought in your head.  so in that sense it's negative, and your parallel to the case of whiskey for a teenage party is a good one.

by wchurchill on Fri Apr 6th, 2007 at 08:42:51 PM EST
[ Parent ]
The other paradox is that marketers manipulate people as groups (demographics in market-speak), whereas marketing is experienced individually.

One could say the same about war. Armies are manipulated as a group to achieve strategic and tactical ends, but the immediate consequences are individual - if you are one of the inevitable casualties.

You can't be me, I'm taken

by Sven Triloqvist on Sat Apr 7th, 2007 at 04:35:00 AM EST
[ Parent ]

The Economist

A recent report by analysts at Credit Suisse estimates that 80% of subprime loans made in 2006 included low "teaser" rates; almost eight out of ten Alt-A loans were "liar loans", based on little or no documentation; loan-to-value ratios were often over 90% with a second piggy-bank loan routinely thrown in. America's weakest borrowers, in short, were often able to buy a house without handing over a penny.

Lenders got the demand for loans that they wanted--and more fool them. Amid the continuing boom, some 40% of all originations last year were subprime or Alt-A. But as these mortgages were reset to higher rates and borrowers who had lied about their income failed to pay up, the trap was sprung. A new study by Christopher Cagan, an economist at First American CoreLogic, based on his firm's database of most American mortgages, calculates that 60% of all adjustable-rate loans made since 2004 will be reset to payments that will be 25% higher or more. A fifth will see monthly payments soar by 50% or more.


The greatest difficulties threaten borrowers whose house is worth less than their mortgage. Just under 7% of all American homeowners had this "negative equity" at the end of December 2006 estimates Mr Cagan, using a sample of 32m houses. Among recent homebuyers, the share is even higher: 18% of all people who took mortgages out in 2006 now have negative equity. A quarter of all mortgages due to reset in 2008 are in the same miserable state (see chart 2).

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Apr 7th, 2007 at 05:26:41 AM EST
[ Parent ]
I'd really like to see the math on how those so-called Alt-A loans were tranched out. I mean, when you have a large wave in a certain loan practise, all the default and prepay trends of the past are irrelevant.

One thing that isn't irrelevant is that analysts are always planning for the last crisis, never the next. And the last crisis in subprime was prepay risk, and between jobs 7 years ago I got to see the inside of one of these places as they went belly-up (did due-diligence work for G/S at a place called GreenTree/Conseco Finance).

I can just see the flunkeys tranching these things saying: "hmmm, interest rates are going to increase, so prepay risk is minimal." Add to this the natural bias of supply-sider neo-lib flunkeys that the economy will always be bright (and many finance people here think this, especially the younger ones) and I bet the duration of these loans was far overestimated.

And of course the longer tranches are now worthless (well, in truth they always were).

I keep hearing about how this knocks into the real estate market; I've yet to see anything substantial on the bond market (truth be told this is likely my fault, I don't read FT or the urinal) but I bet the People Bank of China was holding a lot of those longer duration mortgage-backed securities...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Sat Apr 7th, 2007 at 08:07:40 AM EST
[ Parent ]
That's an interesting report, although as you say it is a shame it didn't extend to non-english speaking countries.

I feel as though I am destined to rent for life, unless I  buy with another person.  I have a good salary as well but for the mortgage that I can afford, there is nothing worth investing my money in, or nothing I can afford that will give me a decent enough standard of accommodation.

by In Wales (inwales aaat eurotrib.com) on Fri Apr 6th, 2007 at 06:06:13 AM EST

it didn't extend to non-english speaking countries.

A "non-english speaking countries"? what's that strange concept? Does it even exist?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Apr 6th, 2007 at 09:49:22 AM EST
[ Parent ]
It's a bit difficult to come up with a name for this group of countries, even though they're always lumped together, and even though we all seem to know why that is the case.  I was thinking WASP countries, but that doesn't really work in majority-Catholic Ireland or the heavily German and Irish states.

I'm certain there is a good joke in there somewhere, but I got nothin'.

(hangs head)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Apr 6th, 2007 at 10:53:18 AM EST
[ Parent ]
I also found this odd.  I can't recall running across this designation before.

The only thing I can immediately think of to explain this, is that since it is about housing, I wonder if there is a tendency for English speaking people to want to move to, perhaps retire to, English speaking countries.  (and perhaps this would also apply to French and other original language speakers).

For my purposes, this report is very valuable now, but would be moreso if it covered a broader geography--particularly Europe for what I'm doing.

by wchurchill on Fri Apr 6th, 2007 at 01:39:31 PM EST
[ Parent ]
As you point out, wc, America can't really been looked at as one unit, given the dramatic differences across cities and regions.  Parts of California have reached obscene levels.  I didn't realize Australia was no out-of-line.  Dublin's high ratio is to be expected, as is that of London.  By those standards, Americans and Canadians look like model homeowners.

The three-to-one ratio is an historical norm, but four-to-one is not at all uncommon.  It depends on the interest rate, future income, etc.  Interest rates have been quite low in recent years, so the ratio is, to some extent, also a product of that higher price becoming more affordable.

And then there's the sub-prime mortgage, too, of course.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Apr 6th, 2007 at 11:01:44 AM EST
The US house market inhomogeneity is well known. Even more, each region has its own ups and downs; economies prosper and break. I have academic coleagues in the US, who had to move each few years in the beginning of their carreers, and they can tell locky stories how they swtiched from the house morket at the top to a house market at a bottom, but perhaps more frequently unlucky stories, when a person had to leave a market at the bottom and enter a booming market. It looks asif Americans love this game.

As with any single number, the circumstances can be played to strip the number much of the meaning. House affordability of the last decade is determined much more by financial policies than by house prices. It is not house prices that were driving affordability, but "affordability" of financing tools was driving house prices. Especially at a "subprime moment", when you can buy with no money down, the role of house price is marginal or purely taken into account.

At a period when house prices variate much more wildly than the income, the particular affordability index is telling rather something else. At times, it may be an indicator of the boom/bust phase. But that also can be distorted. The Australian index 6.6 would indicate a high boom, but in fact they are generally several years beyond that. Here the inhomogeneity lies in the class of houses: the index is inflated by the grandeur housing prices, say, at the waterfront of Sydney harbour. But some Sydney surburbs badly busted recently, while most surburbs beyond central Sydney are in reletaviely slow recession (with house prices reluctantly sliding from the high plateau).

by das monde on Fri Apr 6th, 2007 at 10:43:31 PM EST
[ Parent ]
Booming prices along the water are no surprise.  The same would undoubtedly be true of nice areas along the water in any major American, English, Canadian, or Irish city.  Even smaller ones -- Charleston, Savannah, St. Augustine, etc -- will put you well into the million-dollar budgets, albeit with a hell of a lot more house for the money than you'd get in (say) Boston.  (I suppose Philly might be an exception to this, given that it would put you closer to Camden, but I haven't the slightest idea.)  I shudder to think what a decent flat overlooking the Thames near the City or Parliament would cost.

The financial instruments are clearly playing a role, but I suspect that role is being played largely at the lower income levels.  (I have absolutely no basis in data for that suspicion, though.)  The boom/bust view is probably important.  This latest housing boom began back in the mid- to late-1990s, when the America economy was turning in 4% growth every year, and I think that certainly produced a shift in income expectations.  (A lot of people, when you look at the jobs that were created at the time, made a lot of money, and it spilled over, in many cases, to guys like me who caught the benefit of an extremely tight labor market.)  The low interest rates sustained the boom, along with the financial instruments.

The truth is that any of these could've pushed up demand, and delivered rising prices.  All happened.  I'm thankful that it seems to be coming to a halt before prices reach the levels we're seeing in Australia and Britain -- the latter having a boom that was (and apparently still is) not limited to a select few areas.  As I've mentioned, you can still find big cities in the states where prices remain reasonable, especially for a household with two income-earners.  That does not seem to be the case in the UK, even after getting out of the Southeast.  Prices in Birmingham and Nottingham are lower than London and Brighton, but incomes are also a lot lower.

I'd make the point that wc may well be correct about the eventual outcome.  A price-to-income ratio of 3.7 is high, but not overwhelmingly bad.  If it were 6.6 or 6.2 (or whatever the Australian counterpart came in at), I would be sweating bullets.  It'll be painful in some areas, but, as always, it's a necessary evil, and it doesn't seem large enough to cause catastrophic effects in the aggregate.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Apr 7th, 2007 at 11:46:17 AM EST
[ Parent ]
It's about control.  The "answer" to the "problem" is that larger portions of the population can not afford the privacy and isolation of owning their own place.
Mega-cities and cramming people into high density living areas is the "answer",if anybody lives that is.
by Lasthorseman on Fri Apr 6th, 2007 at 10:10:39 PM EST
As you may guess, I do not like focusing on a single number to tell how well things are going. Economy is such a complicated manifold, than in any fixed-parameter fiber you have plenty of room for variation and manipulation.

Greenspand measures can be hailed as giving house affordability for an unprecedented portion of population, or critisized as irresponsible outgrowth of bubbles ("expansions"). The moment of reckoning might be coming soon.

In a March 29 column in the New York Times, University of Chicago economist Austin Goolsbee cited data supporting the thesis that new kinds of mortgage loans had greatly expanded home-ownership among sectors of the population that had previously been kept out of the market. [Goolsbee] was championed throughout the blogosphere as yet more evidence that critics of subprime lenders were actually "credit snobs" who don't believe that poor people should be allowed access to new financial innovations..

In the current New Yorker, James Surowiecki repeats parts of Goolsbee's thesis [and] also suggests that home-buyers who borrowed above their means should get their share of the blame for the current mess. Shed no tears for the speculator who gets burned trying to make a quick profit by flipping a house without putting any money down, he says.

[There] have been commentators like Mark Thoma at Economist's View, who avoid the all-or-nothing formulations so popular with pundits while pondering the appropriate mix of policy actions that would restrict fraud and the worst lender excesses without keeping worthy buyers out of the market. But from a rhetorical point of view, the shift in emphasis on how the housing bust is being covered has been fascinating to watch. To accuse those who are suspicious of subprime greed of being anti-poor is a remarkable feat of class warfare jujitsu, an act in which one's own aggression is turned neatly back against itself.

But what's happened in the course of the defense of subprime and option-ARM and no-money-down loan innovations, is that we are being distracted from the deeper story. And that's not necessarily who is to blame for the popping of the bubble, but what the pop means for the greater economy.

Economy.com's Mark Zandi is quoted in yesterday's Wall Street Journal predicting that the number of home foreclosures in the U.S. will hit a record 1.3 million in 2007.

[The] Journal reports today that housing inventory "surged" in March -- "The number of homes listed for sale in 18 major U.S. metropolitan areas at the end of March increased 6.5 percent from a month earlier..." Combine that news with Zandi's prediction on foreclosures, and home prices seem guaranteed to drop significantly as the year progresses. Meanwhile, there are increasing reports of growing delinquency rates in mortgages that are considered one notch more respectable than subprime loans -- the so-called Alt A loans. Job losses in the construction industry are also accelerating. Recession predictors have plenty of data to choose from.

Tightening loan standards now, when Wall Street has already lost its appetite for subprime and Alt-A loans, is a classic closing-the-condominium-door-after-the-borrowers-have-all-gone-bankrupt strategy. The real question is whether at the height of the madness, in 2005 and 2006, when my phone was ringing off the hook with obviously dodgy telemarketing calls begging me to refinance my mortgage, some sage words from government officials or policy action could have prevented the market from getting out of whack. We'll never know the answer to that, because the de facto decision was to let the market take care of itself.

And maybe that's where it will end. Maybe the subprime lenders who got too greedy will all go bankrupt, the investment banks that gave them the credit to play with it will take medium-sized financial hits, and the borrowers who shouldn't have been borrowing will instead be renting newly available cheap apartments. That's the rosy scenario.

The less pleasant prospect is a recession that could have been avoided if Congress and the White House had recognized a destabilizing bubble in the making, and had taken some mild corrective action to calm the waters.

As Salon.com's Andrew Leonard says, recession predictors have plenty of data to choose from. Consider this report, for example:

Mortgage crisis hits million-dollar homes

On a lighter note, try to enjoy a real estate roller coster.

by das monde on Fri Apr 6th, 2007 at 11:57:31 PM EST
As this report shows, there are nice cities in the US (not like New York, Paris, London of course) where the median housing price is only 2 times the median annual income.

Yes, for an income multiple of only 2, ladies and gents, you, too, can breathe the fumes in Houston! ;)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Apr 7th, 2007 at 11:56:14 AM EST
House "ownership" is soooo "Last Century".....

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Apr 7th, 2007 at 04:51:40 PM EST

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Italian government collapse

by IdiotSavant - Jan 15

A New Dawn In America

by Oui - Jan 20

Forever Corruption and A Pardon

by Oui - Jan 20

Dutch Government Collapse

by Oui - Jan 16