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The mortgage problem, the huge housing bubble that burst devastating everyone was predictable. Take a look at the graph and the historical home price line since 1970. That had been a straight line almost exactly with inflation until approximately the year 2000. Then it exploded into a giant bubble skyward. See graph. |
Home financing was changed and anyone who could sign his name was allowed to finance a house. This got everyone buying houses as an investment, fix em up a little and resell them. There was so many people buying houses the prices rose sharply.
They sometimes were listed and sold even before they hit the published sheets.
Everybody made money, the more that made money, the more others heard about it, and it exploded because those who wanted to, bought more homes with almost no limits on financing or on who got a home financed.
In six months they could sell if for $10,000 more then they paid for it or they could get a second mortgage on the new extra equity that had developed from the rapidly rising prices and take a vacation.
Everybody was making money, the whole country was prospering as a result and the politicians where patting themselves on their back on how well everyone was doing with them managing the economy, vote us in again.
The private home ownership was their piggy bank to draw new equity out of as its price rose and equity grew rapidly. They spent the new found money on new bigger everything.
Home Equity Prosperity nationwide was on a roll.
Those without a home of their own, if you needed a home you best hurry and get one before they went up in price any more. Your last chance to still be able to afford one.
Look at this graph. 2000. This was a "set up" prosperity artificially induced "easy credit" bubble.
Six years, this fantasy paper work government sanctioned air bubble lasted.
This did NOT JUST HAPPEN. This was set up for a bust by government stupidity.
Now the public is paying as it goes accelerated the same only down this time with self feeding down collapse of price and equity just as there had been self feeding increase up.
Even Greater Government Stupidity: Foreclosure Fuel see Part Two >
