Saturday, Mar 07, 2009
Overlending followed by defaulting leaves the trend in house prices down down down
Guardian: Key to Recovery? US House Prices
When will THEY get it! The article says "it's easy to forget it was the "delinquency" rate among sub-prime mortgages in the US that started this crisis." NO LIKE THE UK IT WAS LENDING OVER 3x's PEOPLE'S INCOME that led to this crisis, allowing houses to be used for investment instead of simply homes that led to this crisis...encouraging world wide investment in spiraling house prices due to investment therefore no incentive to say STOP and return to sensible lending. We can't blame people defaulting on overpriced property for the problem WHO LENT THEM THE MONEY WHO ALLOWED HOUSE PRICE TO INFLATE IN THE UK 190% IN 10 YEARS? US property prices I believe only inflated 78% and their defaulters (not just subprime) broke the global banks, what will 5 million in the UK in negative equity do?
5 Comments
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1. paul said...
I think this is a matter of terminology. Delinquency rates were the catalyst for the crisis.
A critical mass built up which eventually tipped the heavily leveraged system into the abyss. The tipping point was that everyone realised that houses were overvalued on illusory wealth.
In that respect Collinson is right I think drayal, but he is focusing on an effect of the drying up of credit which was a reaction to overvaluation, rather than on the root cause which was underpriced credit.
If credit was correctly priced, the house price boom would never have happened.
2. will said...
300% in Devon over 10 years. Pure insanity. Can any sensible person explain how it could have happened ? Of course the rise is only on paper, as many are now finding there are no buyers at these prices.
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5. mark wadsworth said...
"what will 5 million in the UK in negative equity do?"
They will whine and moan, and 646 MPs, the bulk of whom own two homes will willingly comply. The Hallowed Homeowner Class will be sucking on the taxpayer teat for a decade or more. In round figures, UK savers have had £30 billion per annum pinched off them to subsidise ten million borrowers to the tune of £3,000 each, i.e. for every £1 council tax they pay, they get £3 back in mortgage subsidies.
This is what I laughingly refer to as a post-modern tax/subsidy system.