[quote=The-Shoveler]IMO any crash were it to happen would not be near as severe as the last time
Everyone keeps thinking we are doomed to repeat the last crash when there is almost none of the conditions that really caused the last crash occurring right now (that was truly a once in a life time event).
what we have going on now is more like what happened in the 1980’s when the boomers were coming of age to buy homes, only this time its millennials.
and Please STOP BLAMING BOOMERS, look across the Aisle at you old classmates.[/quote]
Are you referring to just the housing crash, or the credit crisis that led to the recession? There were three distinct, albeit interconnected, phases. The problem is that even last time we didn’t know exactly what the causes were until after the event. At the time it looked like lending was out of hand and irrational behavior had taken hold. All you need to know is that prices are very high. I don’t believe that prices have to be as high as the last bubble to qualify for a bubble.
What is common between now and then is high prices, monetary and fiscal policy aimed at buoying prices, conveyor belt collateralized mortgages, a sophisticated lending market, and government policy aimed at increasing home ownership. On top that you’ve had tax credits, mortgage interest deductions, a distorted property tax code, government guarantees, low deposit requirements, and schemes such as HAMP. So what subprime did for the last bubble you can find plenty that took its place. On the other hand, credit is tighter and investment banks are (hopefully) not stuffing toxic loans and concealing them in investments. But, you also have very low supply, a lot of speculative investor activity, and a market that was distorted by distressed properties. There is still a back log of REOs in some states. Pile on top of that the very low labor participation rate and anemic economic growth. Now throw in the Fed’s hesitancy to raise rates.
Now please explain to me what is good about our current situation? Your home has increased in value? Well, that doesn’t make you richer unless you sell it and downsize. You can borrow against it, but we know where that leads. No. Houses do not substitute for stocks and bonds and should not be a retirement plan. It doesn’t work. We need to get back to a normal market based on historical averages. Savings should be put to better use and people worried about having enough to retire on should be concerned about all these asset distortions, not relying on them.
