[quote=sdrealtor]Exactly you could buy, its affordable but you chose not to. Whether it is rational our not wasnt something I was addressing. I was only looking at affordability as evidenced by Eugene’s graphs.
BTW, all areas have fallen and I dont understand how someone can think certain areas weren’t “allowed” to fall.[/quote]
It’s affordable to us because of certain circumstances; it’s not as “affordable” as I’d like based on our earned income.
The higher end was not allowed to fall (as much as it should have) because the government stepped in once it became obvious that “subprime” was NOT “contained.” The lower end fell first because those buyers had absolutely no buffer, and many of them were literally paying their mortgages by getting new, larger mortgages. It took no time at all for them to default, because they had no downpayments (in many/most cases), and not enough income to make their monthly payments if prices stopped going up (which allowed them to “cash out” their equity to pay their debts and mortgages).
The mid and higher tiers had more of a buffer because the sellers of the starter homes during the bubble were able to bring hundreds of thousands of dollars with them to put down on a house in a mid-higher tier area (this is why you saw housing prices increase by about the same dollar amount, as opposed to a similar percentage). Many of these people did a final “cash out” before the crash and banked that money (I know of a few who did this), and others at least had equity that enabled them to sell, even if they lost some of their down payment. That’s why it looks like there is “less distress” in the higher-end areas.
AS the declines were moving into the “prime” mid-high tiers, the govt/Fed freaked out and began with the “foreclosure moratoriums” and govt-backed mortgage market.
The bulk of the declines happened in late 2007/early 2008, when the credit market froze up. Once the govt stepped in, the declines tapered off, and the mid-high end was spared much of the damage seen in the lower-end areas.
If the Fed/govt had never intervened, I fully believe prices in the “more desirable” areas would have seen declines similar to the declines seen in the lower-end areas.
Because of this intervention, prices in the better areas have not been “allowed” to fall…yet. We will see if the govt steps back once the risks are shifted from the private market to the taxpayers. That transfer is almost completed, which makes me think the downturn will resume within the next year.
It was ALWAYS about saving the banks. They never cared at all about “keeping FBs in their homes.”
