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Economists say that high gas prices triggered the housing crisis in 2007 (2012)

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Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#51

Post by andrew_ »

andrew_ wrote: post #11
treis wrote: post #9

Earlier quoted context omitted.

Not a bubble because for the most part people are buying homes that they can pay the mortgage on. High energy prices are also going to spike inflation which eventually means rates rise. If that happens owners with their 2.75% mortgages aren't going to be inclined to sell. Coupled with higher new construction costs the housing market probably continues to rise.

makes me wonder if student loan default en masse could follow this time.

I'd really like to know why this is getting negged. Student loan debt is a massive number, and if significant numbers of people simply stopped paying, it going to have a major toll.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#52

Post by brendoelfrendo »

simula67 wrote: post #48
alkonaut wrote: post #16

Had to read half the article before the word "gasoline" appears, indicating that the gas in the headline is vehicle fuel and not heating gas. After reading the whole thing, I'm still not 100% sure.

Why Americans refer to petrol as gas, even though it is liquid, is still a mystery to me.

It’s short for gasoline, a word that, etymologically, has no relation to the word gas.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#53

Post by FollowingTheDao »

mumblemumble wrote: post #25
treis wrote: post #9

Earlier quoted context omitted.

Not a bubble because for the most part people are buying homes that they can pay the mortgage on. High energy prices are also going to spike inflation which eventually means rates rise. If that happens owners with their 2.75% mortgages aren't going to be inclined to sell. Coupled with higher new construction costs the housing market probably continues to rise.

> owners with their 2.75% mortgages aren't going to be inclined to sell. Or able to sell. This is the other side of historically low rates pushing home prices up by allowing people to pay higher prices while keeping their mortgage payment affordable. If (when?) rates go back up, that may cause prices to fall. This could also put people underwater on their homes, and even trigger another (hopefully smaller?) wave of f…

> Or able to sell.

This is crucial. Many people sometime need to sell. When people cannot buy it they lower the price. When they lower the price the valuation of neighboring houses goes down. If people also have less money saved because of higher oil prices, well, they another compounding factor.

Rates are going to go up, and it is much to late in the game for them to rise without serious repercussions.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#54

Post by HideousKojima »

martinald wrote: post #41

Taking a car that does 25mpg, at $2/gal gas you can do a 100 mile round trip commute each workday for $160/month in gas. At $4/gal it goes up to $320, etc. That doesn't seem like a big enough jump to me to cause people to default en masse on their mortgages and trigger the crisis - compared to the teaser rates which probably made mortage payments jump by $500-1000+ when expired?

Higher gas (and petroleum product and energy in general) prices have a lot of knock-on effects on prices beyond just the cost to make a commute. The costs of delivering goods goes up, higher energy prices means lower profit margins for virtually every industry, etc.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#55

Post by ryanSrich »

martinald wrote: post #41

Taking a car that does 25mpg, at $2/gal gas you can do a 100 mile round trip commute each workday for $160/month in gas. At $4/gal it goes up to $320, etc. That doesn't seem like a big enough jump to me to cause people to default en masse on their mortgages and trigger the crisis - compared to the teaser rates which probably made mortage payments jump by $500-1000+ when expired?

I agree. But then again, most of my knowledge of the housing crash comes second hand. It didn’t impact my parents (rural area, one mortgage), and I don’t personally know anyone that defaulted or had their parents default.

On the other hand I acutely remember the gas prices at that time. I was a senior in high school and filling up my tank was something i specifically had to save a decent amount of money for.

So perhaps that was the bigger issue, but it does feel like an insignificant amount of money in the grand scheme.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#56

Post by trgn »

bochoh wrote: post #20
ejb999 wrote: post #14

Earlier quoted context omitted.

yea, all those poor people who can't afford to fill their cars should just run out and buy Teslas instead.

I know this is sarcasm but for those people with big pickup trucks (I should say vanity trucks, not real work machines), you’re looking at 26 gallon tanks @ 4.20/gallon. If they’re doing that once a week (conservatively) plus a presumably large truck payment, they could more than pay for a Tesla all other things aside. I personally lease a Kona Electric which after rebates and incentives costs me ~$350 a month

+1 It's been almost two decades since the last spike, five since the oil crisis of the 70s. If you're buying 50k plus gas guzzlers, and then get squeezed when gas prices are going up, it's almost self inflicted by now. So many alternatives: electrics, small frugal cars, carpooling, telecommuting, ... Can't believe USA is still incentivizing this madness.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#57

Post by asteroidp »

martinald wrote: post #41

Taking a car that does 25mpg, at $2/gal gas you can do a 100 mile round trip commute each workday for $160/month in gas. At $4/gal it goes up to $320, etc. That doesn't seem like a big enough jump to me to cause people to default en masse on their mortgages and trigger the crisis - compared to the teaser rates which probably made mortage payments jump by $500-1000+ when expired?

It's amazing how tight people budgets are they simply can't absorb a relatively small increase

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#58

Post by FollowingTheDao »

treis wrote: post #45
shawabawa3 wrote: post #27

Earlier quoted context omitted.

> for the most part people are buying homes that they can pay the mortgage on The question is can they still pay the mortgage if cost of living goes up significantly (like it appears to be)

Inflation helps borrowers. They get to pay back their loans with cheaper dollars.

This is very simplistic. If wages do not rise this doe snot help the borrower. And rising inflation will probably mean a higher risk of that same person becoming unemployed.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#59

Post by Symmetry »

Well, high energy prices meant that when Lehman Brothers was collapsing in late 2008 the most recent data the Fed had said that inflation was running above 5% and they thought they had to be careful about that. In reality deflation had already started but it takes months to collect and process the data to show that. Fears that injecting money into the financial system would further stoke inflation made the Fed ask for and receive the power to pay interest on banks' excess reserves, to encourage them not to lend out the newly created money. This had never been tried before, the Fed didn't have any experience using this tool, and it seems that they set the interest rate they were paying banks to not lend out their money much too high.

Re: Economists say that high gas prices triggered the housing crisis in 2007 (2012)

#60

Post by FollowingTheDao »

mumblemumble wrote: post #46
jessaustin wrote: post #33

Earlier quoted context omitted.

It can't be discharged through bankruptcy (thanks Joe!), but neither can we squeeze blood from stone. Debtors who don't have the funds to both eat and make their payments will not make their payments.

I assume that by Joe you mean Joe Biden? Student loans haven't been something you can discharge in bankruptcy since the 1970s. If you want to thank a US president (as opposed to, say, the legislature that actually passes these laws), you should be thanking Gerald.

Bu Biden said he would change this. And he did not. And in fact he is actively fighting them in court.

https://www.washingtonpost.com/education/2022/02/17/biden-st...

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