Monday, August 22, 2005

Contributing Factors

Here is my list of contributing factors that are responsible for the housing bubble. They are in order of most significant to least significant:

  • Low interest rates
  • Lax lending standards / exotic loans
  • Greed ( flippers, speculators)
  • The tech bubble ( people were less likely to invest in the stock market)
  • A perceived lack of housing units to accommodate future growth
What other significant factors are there that contributed to the housing bubble?


  1. Here is one to add:

    The idea that a home is an "investment".

    No, it is a place to live, everyone needs one.

  2. Competative affluence aka keeping up with the Jones'. A materialistic definition of "success".

  3. FEAR! Fear of being priced out forever. Real estate agents use it as a sales tactic. "Last chance to buy before prices go higher", "Real Estate always goes up", etc......I hope they are not correct.

  4. Increase in the amount you can profit from your house tax-free on sale, to 500k every 2 years.

  5. Here is a good NY times op-ed. This guy had me going for a moment there...Bubble? What Bubble?

  6. How about the "Greenspan Put" and our tax code. When asset prices go down the Fed produces liquidity with easy money policies which tends to pump them back up. Since the change in the tax treatment of capital gains when selling a primary residence (Clinton late 1990's) it has become more attractive to keep more of ones wealth tide up in housing. A house has also proven to be a good way to hedge against inflation which the Fed's easy monetary policies eventually produces.

  7. How about the "Greenspan Put"?

    That would be included in low interest rates.

  8. Seymour WainwrightAugust 23, 2005 3:36 PM

    Volvo driving liberals who feel guilty about making money and want everyone else to be poor to satisfy that guilt