Much of the developed world (especially America and Europe) had a housing bubble.
The Economist asks why America's fell so much faster than the bubbles in Europe:
Perhaps the difference is institutional. American banks had poorer
lending standards and have been quicker to foreclose on properties;
borrowers have been readier to walk away from their homes. In European
countries, owners have been able to sit tight in the hope that prices
will recover. European markets are certainly a lot less liquid. Irish
transaction volumes dropped by 83% from their peak and Spanish ones by
64%, but American deals fell by just 46%. Europe is going in the same
direction as America. It is just getting there more slowly.
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My, my. Talk about lack of insight. How about the simple fact that we have looser down payment standards than say Canada. So when the market goes against the homeowner they are wiped out pretty quickly and tend to hand in the keys readily. Also to consider is the fact that in some countries mortgages are 'full recourse' so the loss difference can gobble up other assets of the homeowner. Not so in this country.
ReplyDeleteI would love to see a more in-depth discussion about the differences between the European markets and the house bubble in the US. I know very little about standards in other countries, but we could probably take something away from from their practices.
ReplyDeleteI am new to your blog but couldn't stop my self to read it completely as so informative and interesting. thanks for sharing
ReplyDeleteI was building houses at the time of the crash and I will say first hand, there where a lot of people that had no business getting a loan for the houses they purchased. Many were house poor and that means that the house was costing them almost everything they made. Joel@ Peanut Butter Rice Krispie Treats
ReplyDeleteIt's obvious our housing prices were inflated for a number of years and buyers became wise to that fact. Lenders also had a great deal to do with the downturn with their loose lending practices.
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