-lmao
The United States of Real Estate
gloomboomdoom.com
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Former Fannie Mae CEO Franklin Raines was fond of emphasizing the important role of the GSEs in ensuring continually rising home prices. In a speech to the SIA, Raines calculated the supply of credit that would be available for mortgages. Raines then made an independent calculation for the demand for mortgage loans, based on the entirely reasonable assumption of continued home price appreciation.
According to Raines, credit demand would have exceeded credit supply by a significant margin. This would undoubtedly lead to a complete shutdown of the housing market, as home prices remained stuck at high levels that buyers could not afford. Fortunately, Fannie Mae was able to step in and provide the additional credit that was needed to make up the difference between supply and demand.
It was thought by older economists that supply and demand could not be permanently out of balance because the movement of prices would occur until supply and demand were matched. In this mode of thinking, supply, demand, and price were seen as interdependent phenomena. Indeed, without Fannie Mae, the price system would have been required to bear the full burden of bringing supply and demand into balance. This would have meant either higher interest rates, lower home prices, or some combination of the two.
Amos Bullock, a Portland Oregon home owner who has recently retired from any form of productive activity, now lives entirely by refinancing his home on a monthly basis to extract equity. Bullock summarized the impact of the New Housing Economy on his own life: “Is this a great country, or what?” |
