America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
171–180 of 194 posts
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#172OK - The 'web' search/link isn't working for me anymore. Maybe it's time to start rethinking WSJ submissions. Based on the first paragraph, this is the exact same article: http://www.msn.com/en-us/money/realestate/loan-boom-echoes-s...
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#173Earlier quoted context omitted.
AMP version worked for me through the 'web' link.
For lazy desktop-browser users: http://www.wsj.com/amp/articles/americas-fastest-growing-loa...
For users who'd rather support a site that didn't paywall it:
http://www.realtor.com/news/trends/americas-fastest-growing-...
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#174Earlier quoted context omitted.
> We're going to keep going from crisis to crisis because banks can't say no, and the government(s) deems them too big to fail Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. The elderly woman in the article initially refused the $50k renovation to her 5 bedroom home, but then agreed because she thought the government was going to subsidize it for her. Th…
Agreed here. It's kind of a dog-eat-dog world when it comes to finances. Everyone has to watch their own backs, because big banks are going to do what is most advantageous to them, even if that means screwing over other people. There's a wealth of information out there for people to self-educate. Unfortunately, people just don't seem to know where to look. It's a travesty that we don't teach basic finances in high sc…
There's nothing special about credit, loans, and taxes. It's 7th grade reading comprehension and math.
The problem is not financial illiteracy it's general ignorance, illiteracy, and innumeracy.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#175Earlier quoted context omitted.
> We're going to keep going from crisis to crisis because banks can't say no, and the government(s) deems them too big to fail Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. The elderly woman in the article initially refused the $50k renovation to her 5 bedroom home, but then agreed because she thought the government was going to subsidize it for her. Th…
I am incentivized via the tax code to put money into a 401k, which I can take out early only as a down payment to purchase a home, and rent costs more than monthly mortgage payments, especially with the tax breaks for having one. How am I not being pushed to put my money in investment banks or a home?
Rent costs less than (mortgage interest + taxes + condo fees + maintenance) where I live. This is extremely dependent on location.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#176Earlier quoted context omitted.
> Another is that it's hard to come up with a good theoretical reason why asset prices can be persistently wrong for so long. The reason is well understood, but not by mainstream economists. I suggest reading about Hyman Minsky and Steve Keen's research. To summarize, increases in total debt (private or public) contribute to demand, while decreases in total debt subtract from demand. This results in a financial insta…
Yeah that's a reasonable model that links the debt and business cycles together, but it makes a key assumption: that investors only depend on lagging metrics of credit quality (business defaults), so fail to stop the bubble from inflating. What is required is a good theoretical explanation for why investors fail to predict the point they are in the bubble and rein in speculation, since obviously this cycle has happen…
Lenders can't predict the future any better than creditors. There's nothing mysterious about that.
If you want a theory for _why_ the future is unpredictable, read up on chaos theory.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#177Earlier quoted context omitted.
Marx and other classical economic thinkers speculatively connected the fall in the rate of profit to increases in inequality and long-run economic cycles [1]. Essentially, the idea is that since the rate of profit exceeds the rate of growth, rent seekers (capital holders) tend to get richer and richer and own more and more of the wealth. This impoverishes all other parts of the economy and starves it of resources, ca…
The great unanswered question is: what happened to growth? You've outlined exactly one dimension of why we need it - without it, it's rent-seeking all the way down. I am concerned that the emerging "Greatest Generation/Silent Generation/Baby Boom used up all the growth and now we're ... messsed up." becomes a self-fullfilling prophecy, aided by the cumulative nature of assets. I am loath to call rent seekers "capital…
> The great unanswered question is: what happened to growth?
What I've heard others say is that the internal combustion engine, railroad, electricity, the telephone, indoor lighting, assembly line, the airplane were all huge things. Half of those things our grandparents didn't have growing up. The Internet is more recent and has definitely allowed growth, but not quite has much as the others had and other significant things haven't shown up.
We're still growing just not at the scale as we previously had. Also, there could be some new big discovery that could let us return to previous growth...it's hard to anticipate these things.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#178Earlier quoted context omitted.
Marx and other classical economic thinkers speculatively connected the fall in the rate of profit to increases in inequality and long-run economic cycles [1]. Essentially, the idea is that since the rate of profit exceeds the rate of growth, rent seekers (capital holders) tend to get richer and richer and own more and more of the wealth. This impoverishes all other parts of the economy and starves it of resources, ca…
The great unanswered question is: what happened to growth? You've outlined exactly one dimension of why we need it - without it, it's rent-seeking all the way down. I am concerned that the emerging "Greatest Generation/Silent Generation/Baby Boom used up all the growth and now we're ... messsed up." becomes a self-fullfilling prophecy, aided by the cumulative nature of assets. I am loath to call rent seekers "capital…
Growth in any finite system is inherently unsustainable.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#179Earlier quoted context omitted.
Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets and investments a person has. They also tend to only look at raw numbers that look impressive unless you don't think about it too much rather than the whole picture. Grandma bought her house in 1970 for $10,000 and s…
Depends on your definition of investment and what you're looking to get out of it. If they maintain value by appreciating at least at the rate of inflation, then they're a great store of value. At that point, you need to take all expenses into consideration (including any applicable tax deductions and rental incomes from rooms) in order to determine whether you're net positive or net negative versus renting. This can…
In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.[1]
I don't think people are saying you'll never come out ahead (like one might say about someone who wants to take up daytrading). Most of the arguments I hear are, "houses are a terrible investment" or "don't think about it as an investment" and they're not trying to dissuade people from buying houses--just from buying them as an investment. Calling it an investment encourages people to buy when they should rent, or buy larger houses than they should. Houses being the largest purchase most people make and the one thing containing most of one's wealth (and the fact people only do it a few times in their life) should mean people need to be very careful about the decision. People also tend to undervalue the subjective attachment to the houses they live in, causing them to make poor financial decisions.
Like others have said, houses generally perform slightly less than inflation, there are additional costs like maintenance, taxes, and insurance people generally don't always consider. Houses are illiquid, you can move to a place with smaller rent, but you can't divest yourself of half your house (you could take a second mortgage, thought). It's also much easier to relocate when renting even if you're paying the same rent. When fixing up your house it's easy to not think about cost/benefit or blindly think your upgrades will pay for themselves.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#180Earlier quoted context omitted.
> Saying that people intended to default however, is not true. I'm not sure if it's what roymurdock meant, but there's a nugget of truth to what he said. People did take on loans that they never planned to pay off personally. They saw the relentlessly upward trajectory of home prices and wanted to benefit. They took on loans with the intention of refinancing or selling the home a few years down the road. It wasn't an…
You can just as easily say that banks were giving out loans they expected to refinance in the coming years. That is, I find it misguided to fault people for defaulting on loan without faulting people for aggressively pushing people to refinance. The cost of the system failure is being pushed to the people with the least control over it. I'm not looking for punishment. But responsible stewardship of the system control…
> You can just as easily say that banks were giving out loans they expected to refinance in the coming years.
Can't it be both? There's enough blame to go around. My only point was that the narrative of victimized homeowners preyed upon by evil lenders, put forth by a surprisingly large number of people, is misguided.