Economists say that high gas prices triggered the housing crisis in 2007 (2012) • Hacker News Board

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

#81

Post by FollowingTheDao » Mon, Mar 07, 2022, 2:35 PM UTC

throwaway0a5e wrote: post #38

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.

They can pay those mortgages in the moment they sign for them. They cannot necessarily pay those mortgages after inflation screws up the rest of their month to month budget. People always love to circle jerk about inflation "inflating away your mortgage" but that's only if you manage to hold onto it. Wages lagging inflation will still hurt a lot of people. "Just switch jobs" doesn't work in every industry and even wh…

It is also funny that people think banks do not want you to default on your mortgage. What did they learn from 2008? They can hand out mortgages ignoring valid economic signals that these people will not be able to repay it, they will then get your house and the government will bail them out and make laws against sleeping in a public place.

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

#82

Post by namelessoracle » Mon, Mar 07, 2022, 2:36 PM UTC

abeppu wrote: post #61

newsclues wrote: post #6

Earlier quoted context omitted.

Canada’s housing bubble didn’t pop a decade ago, and continued to inflate.

Is there a convincing explanation of why the US and Canadian markets behaved differently? Were Canadian banks smarter about what loans were issued? Not being a Canadian, most of the stories I hear about Canadian real estate are about international investment by the global rich -- is that a large enough share of market to support prices even through a recession?

Why wouldnt it be?

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

#83

Post by zitterbewegung » Mon, Mar 07, 2022, 2:37 PM UTC

ethagknight wrote: post #71

High gas prices certainly preceded the housing crises, but good luck convincing anyone it caused. Very subjective opinion ahead- High gas prices is probably this single most effective way to curb greenhouse gases and I am shocked that Biden and his climate Czar aren’t embracing it. As it stands, even prices doubling or tripling, I would conjecture that a very significant portion of Americans can make significant chan…

Gas prices have been from the $2.00 to the $5.00 mark for the past decade. Adjusting for inflation Gas is getting relatively cheaper but the last time it actually changed consumption it would be around 2008 so it was at the $5.00 mark ($6.55 a gallon).

Biden just released the national gas reserves which is an attempt to keep prices lower. For a long time it has been said that we have to change peoples behavior to solve the global climate crisis but that seems unrealistic and I think instead we should invest in large scale carbon sequestration projects. Telling people what to do doesn't go over very well for anyone.

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

#84

Post by andrew_ » Mon, Mar 07, 2022, 2:38 PM UTC

namelessoracle wrote: post #80

andrew_ wrote: post #51

Earlier quoted context omitted.

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.

Student loan debt has been in de facto default for awhile now in terms of collecting the interest payments. So we already "know" the impact that would have. It also CANT be defaulted in the sense of extinguishing the debt, because the government will just garnish future wages and earnings, including social security checks.

Interesting. I wasn't aware it'd been in a state of default. What's a good resource to get up to speed?

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

#85

Post by prewett » Mon, Mar 07, 2022, 2:39 PM UTC

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.

gasoline -> gas at least has a certain logic to it, even though "gas" is unfortunately already a word that means something rather opposite. "Petrol" has always seemed strange to me, too, though, since nobody pumps black sludge ("petroleum") into their car but rather the clear, fluid petroleum distillate called gasoline.

I got curious, and "Gasoline" apparently comes from "Gazoline", which Samuel Boyd used to avoid trademark infringement with Patent Cazeline Oil (for use in artificial light), which was named after John Cassell. [1]

[1] https://en.wikipedia.org/wiki/Gasoline#Etymology

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

#86

Post by bochoh » Mon, Mar 07, 2022, 2:43 PM UTC

HideousKojima wrote: post #66

bochoh wrote: post #20

Earlier quoted context omitted.

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

I have a truck that I got for cheap (under $4k) and never used as my main commuter car back when I was still commuting, but there are some very practical differences between a truck and a Tesla that most people wouldn't want to give up. Mostly in the form of cargo capacity and towing capacity. As stuff like the cybertruck and f-150 lightning trickle down into the used truck market they'll get more affordable to the a…

Yes I don’t mean to target anyone with real uses for a truck, more those using them to commute. I personally find myself wanting one all the time as a homeowner but can’t seem to justify it personally for the two or three times a year I would actually use it!

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

#87

Post by ethagknight » Mon, Mar 07, 2022, 2:45 PM UTC

zitterbewegung wrote: post #83

ethagknight wrote: post #71

High gas prices certainly preceded the housing crises, but good luck convincing anyone it caused. Very subjective opinion ahead- High gas prices is probably this single most effective way to curb greenhouse gases and I am shocked that Biden and his climate Czar aren’t embracing it. As it stands, even prices doubling or tripling, I would conjecture that a very significant portion of Americans can make significant chan…

Gas prices have been from the $2.00 to the $5.00 mark for the past decade. Adjusting for inflation Gas is getting relatively cheaper but the last time it actually changed consumption it would be around 2008 so it was at the $5.00 mark ($6.55 a gallon). Biden just released the national gas reserves which is an attempt to keep prices lower. For a long time it has been said that we have to change peoples behavior to sol…

Just let gas prices be higher than we are used to, people will figure it out for themselves. Blame it on Russia, Saudi Arabia, ramp up local production and call it a day.

I recently sold my large luxury SUV in exchange for a smaller sedan ( that happens to be electric). I’ve always thought I needed a large SUV to do the things I want to do, so far nothing is changed. I personally made a huge quantum leap in personal vehicle choice, tesla convinced me, but frankly the new car could’ve been a more mundane sedan and still saved me a fortune. Lots of low hanging fruit out there if gas prices really are “too high“

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

#88

Post by Spooky23 » Mon, Mar 07, 2022, 2:45 PM UTC

treis wrote: post #9

chrisan wrote: post #4

> "The key word is, 'triggered,'" said JunJie Wu, an OSU economist and one of the authors of the paper. "This theory recognizes the role of subprime mortgages and lax lending practices as inflating the housing bubble, but high gasoline prices provided the trigger that burst the bubble." Are we in another bubble? And if so what is the theory for why? I assume subprime and lax lending wouldn't be the cause after the le…

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.

Gasoline is a big trigger because it's a variable expense for people living on the edge of what they can afford.

People are really bad at risk management. So when you have a couple pulling in $200k/yr with some crazy mortgage on their $800k house, commuting 30 miles in their 17mpg SUVs, each $1 in gasoline cost increase adds $150/mo in monthly expenses.

There are lots of people like this, many of whom are in weird stress situations already because of issues with COVID and school, etc.

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

#89

Post by Spooky23 » Mon, Mar 07, 2022, 2:47 PM UTC

PragmaticPulp wrote: post #47

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)

The cost of living increases are heavily driven by housing prices, which they’ve already locked in for themselves. Unless unemployment spikes dramatically (the opposite of what’s been happening) and they lose their jobs and they bought homes on the ragged edge of what they could pay monthly, this is unlikely to be an issue.

There's a delicate balance... if interest rates rise to control inflation, prices will drop and the 2008 crisis demonstrated that many will just walk away from their homes, which triggers another round of price drops.

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

#90

Post by mgh2 » Mon, Mar 07, 2022, 2:49 PM UTC

huitzitziltzin wrote: post #72

Economist here. For what it’s worth I cannot find evidence that this paper was ever published, so I think it’s safe to say they did not convince the rest of the profession that this was the (or even a) trigger. I’m sure it’s being shared to suggest that high current gas prices will do the same now. I doubt anyone has any good reason to be confident in such a suggestion.

The link to the paper is broken, wanted to examine their method to see if the analysis is sound