Krugman on the Housing Bubble

[antigop]

Run time: 05:56 https://www.youtube.com/watch?v=qo4ExWEAl_k   Posted on YouTube: September 10, 2006 By YouTube Member: Views on YouTube: 0   Posted on DU: August 12, 2007 By DU Member: antigop Views on DU: 1064

 
This was posted on Youtube Sept. 10, 2006.

[fencesitter]

1. Krugman is usually always proven right...

I can't believe he said "bubblicious".

[Warpy]

2. This will be a little different from the Great Depression

because the stock market crash was sudden, leaving people who lived through it to tell us, "The money just disappeared overnight." People were left with stock certificates that were essentially worthless but still represented debt, as so many had been purchased on margin.

Housing is different. Housing will never be worthless. Quite probably, all mortgages written over the past 3 years will default as housing prices finally start to drop and drop below what the occupants owe on them. Quite possibly, many mortgages written in "hot" areas over the past 10 years will default for the same reason, as overbuilt housing stock continues to sit on the market forever and owners start to offer panic sales.

However, the housing stock occupied by people who have built up significant equity isn't going anywhere, and it will never be worthless, although it will be hard to sell when the time comes.

All bets are off if the credit card companies start to tighten up and demand payment, though.

[Turbineguy]

4. You are quite right

The stock market crash of 1929 wiped out those who bought on 96% margin. This time the stock market worldwide has dropped much more than the amount of money at risk in the mortgage market.

There are also people whose home values will drop below the mortgaged amount but who will continue to make their payments as the house prices are likely to come back up. Dumping your house at the bottom of the market, losing everything and then having to recover will likely mean you would be buying back-in in a much higher priced market in a few years. Better to sit this one out.

[Snarkoleptic]

3. It's going to get a whole lot worse through '08.

[LynneSin]

5. This is why I'm buying my house now

I have an amazing rate and the price for this house is already well under market price. I figured if I wait until Bush is out of the White House I won't be able to afford a place as nice as I found.

[OrangeCountyDemocrat]

6. I Wouldn't Buy Now Unless Absolutely Necessary

Things are going to get Much, Much, Much Worse! So long as this mis-administration is in power, it's going straight downhill.

Prices in 2 years will be substantially lower, especially if we're deep into a recession by that time, which I find highly possible.

[LynneSin]

7. I know but I'm also tired of renting

and I have some money available to help buy the house.