[quote=trex]If everyone were this rational, the banks would behave more responsibly as well , requiring down payments and real income….[/quote]
Getting the banks to be more responsible about home loans requires more than rational behavior by borrowers. It also requires a removal of govt and private mortgage insurance schemes. The presence of these schemes completely undermines incentives for responsible loan underwriting.
When we have responsible home loans (no FHA or PMI or other nonsense) then we will have a sensible market for homes. Will this ever happen? Probably not in my lifetime.
