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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)

#111

Post by FollowingTheDao »

FollowingTheDao wrote: post #65
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 am homeless from a genetically induced disability and live in a 2001 Minivan that gets 25MPG. What do I do?

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

#112

Post by karmakaze »

ddubski wrote: post #94
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.

Hi, I’m the OP. I shared this because from a practical perspective it seems that filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget, and when expensive housing (owned or rented) stretches household budgets, prolonged increases in gas prices could feasibly be a “straw that breaks the camel’s back”, as another commenter mentioned. I appreciate the far more educa…

> filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget

With work-from-home I'm finding that this is absolutely not the case anymore. I do walk a block every few days to buy simple groceries that I didn't used to do. This isn't about the car and mostly as a way of making up for the exercise I don't get by going to the office every day and associated incidental walking/meandering.

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

#113

Post by ethagknight »

lucaspm98 wrote: post #96
ethagknight wrote: post #87

Earlier quoted context omitted.

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…

The average electric car transaction was $63k in January, compared to $26k for a compact car and $34k for a crossover. Americans already tend to buy way too much car, financing them over 60 or even 72 months, and that was happening before the incredible price increases over the past 2 years. Only the (increasingly small) upper middle class and above can responsibly afford an electric car. Even expecting the general p…

If I’m following correctly, I think what’s missing from your comment is that a Kia Rio is $17k brand new and includes carplay, gets 36 mpg combined, 10yr 100k mile warranty, and doesn’t bother with complicated/expensive hybrid or battery.

To your point, people just don’t want that car because… cars play into one’s identity and style (at least marketing tells us it does). But that shouldn’t drive our geopolitical oil and gas strategy. Neither should the fundamental expectation that USA should be guaranteed the ability to drive 100 miles on $10 worth of gas in the average vehicle sold.

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

#114

Post by caeril »

karmakaze wrote: post #112
ddubski wrote: post #94

Earlier quoted context omitted.

Hi, I’m the OP. I shared this because from a practical perspective it seems that filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget, and when expensive housing (owned or rented) stretches household budgets, prolonged increases in gas prices could feasibly be a “straw that breaks the camel’s back”, as another commenter mentioned. I appreciate the far more educa…

> filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget With work-from-home I'm finding that this is absolutely not the case anymore. I do walk a block every few days to buy simple groceries that I didn't used to do. This isn't about the car and mostly as a way of making up for the exercise I don't get by going to the office every day and associated incidental wa…

The FedEx/UPS/Amazon/Doordash vehicles still require fuel. The trucks bringing food and supplies to your local grocery store use fuel. The fertilizer used to grow your food required fuel. The construction and maintenance materials for your current dwelling require fuel. The plumbers, electricians, cleaners, trash collectors, locksmiths, etc require fuel. The container ships that transport good from China require fuel.

Literally everything you use in life, even if you're the most shut-in Hikikomori on the planet, is downstream of fuel. If the fuel cost increases are transitory, you might not notice it. But if they persist, you absolutely will.

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

#115

Post by mumblemumble »

treis wrote: post #108
FollowingTheDao wrote: post #53

Earlier quoted context omitted.

> 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.

The "bid" order book is extremely deep though. Lots of people priced out that are willing and able to buy at lower prices. So it's unlikely the we get into a bubble popping situation. Worst likely case is static nominal prices while inflation erodes the real prices. The only sort of cataclysmic risk out there is a change in government regulations. Zoning changes, Prop13, or some action banning investors owning SFHs.…

In 2008/2009, there were also lots of people who were previously priced out, but that didn't help stem the tide of foreclosures. The depth of the "order book" is far from the whole story when you're dealing with an illiquid, non-fungible good that's also encumbered by a lien.

Here's a concrete example that I can take from my own life experience: there was a house we were quite interested in buying. The house's realistic value for the market at the time should have been something we could afford. But the owners simply couldn't let it go for less than about $50,000 more than that, because that was the price at which they could pay off their home loan. So, too bad, no deal. And apparently nobody else would buy it at that price, either. About a year later, this gorgeous, well-cared-for house was foreclosed on, and then at some later date people broke in and ripped out all the copper and whatnot, and so this house eventually got auctioned off as a rehab/teardown job for a (presumable) fraction of what we would have bought it for.

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

#116

Post by not2b »

People are extremely sensitive to rises in gasoline prices because they are so visible. But the crisis was triggered by a wave of people bidding prices on houses higher and higher, taking out loans they couldn't afford, hoping to flip or accepting balloon payments they thought they could escape by selling at a higher prices, because home prices are guaranteed to go up, right?

Some people bought houses a very long way from their jobs and may have been hurt by an increase in gasoline prices in some areas, but if so, this only affected the timing of the crash, perhaps moving it up a little. It was an unstable structure that was guaranteed to fall apart.

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

#117

Post by Doxin »

causi wrote: post #67
simula67 wrote: post #48

Earlier quoted context omitted.

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

Gas is short for gasoline, which is what we're putting in our cars. Petrol is short for petroleum, which is not what Europeans are putting in their cars. Remind me again which colloquial wording makes the most sense?

Well I dunno, last time I checked by far most of Europe does in fact not call it petrol. I can't claim to know which word is most commonly used, but as an anecdote the dutch call it "benzine" which is also "wrong" but in a different way from both gas and petrol.

Seems to me no one can figure out what the proper name for this stuff ought to be :P

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

#119

Post by ThinkBeat »

As someone who worked on the inside of the mortgage industry at the time (software and db) there is no doubt in my mind that the crash would have happened even if gas was at $1.

Insane loans were granted then loans bundled, sold, rebundeled,sold and so on. The more established banks that bought our loans did zero due dilligence, they just boundled things up and sold them.

We usually only had the loans less than 48h. Wells Fargo (one of the banks that loved our loans) usually max of 96h usually less.

We would sell loans that had $1500 - $2000 payments per month to someone living in an appartment just able to afford $400 in rent.

Towards the end, we started having mortgages pile up that we could not sell, and so we had to actually service them. I think somehow the boss managed to give them away to some other entity because we had 0 infrastructure, software, procedures to do it.

The boss and founder managed to sell the business about 3 months before the big bang.

I quit 6 months prior. Glad I did. I feel guilty and ashamed that I ever worked at that place. It did not even pay very well. The sales people made enomous bonuses if they were able to make sales.

I had friend who stayed until the bitter end.

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

#120

Post by karmakaze »

caeril wrote: post #114
karmakaze wrote: post #112

Earlier quoted context omitted.

> filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget With work-from-home I'm finding that this is absolutely not the case anymore. I do walk a block every few days to buy simple groceries that I didn't used to do. This isn't about the car and mostly as a way of making up for the exercise I don't get by going to the office every day and associated incidental wa…

The FedEx/UPS/Amazon/Doordash vehicles still require fuel. The trucks bringing food and supplies to your local grocery store use fuel. The fertilizer used to grow your food required fuel. The construction and maintenance materials for your current dwelling require fuel. The plumbers, electricians, cleaners, trash collectors, locksmiths, etc require fuel. The container ships that transport good from China require fuel…

Yes, the cost of energy has been important since the 1970's energy crisis. That fact doesn't add much to this conversation. I thought that the point being made was the direct use of fuel was a major line item in personal budget (or near-direct if substituting Uber rides for own car) which doesn't have to be the case.
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