The Epic American Credit and Bond Bubble Laboratory Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: John Vosilla who wrote (49050)	1/11/2006 1:23:16 PM
From: GraceZ	Read Replies (1) of 110194

Wasn't that much more true during the Ozzie and Harriet days of the 1950's and 60's where people actually paid off their mortgages and didn't view their home as an investment vehicle and ATM like today? I call what is going on today overexpansion of credit and misallocation of capital.. I was speaking about the last four years. When you look at the changes over a longer period you'd see that the amount (percentage of income) that individuals can and will devote to shelter has been reasonably constant since the end of WWII. The thing that changed the most is the interest rate/inflation rate. So there are periods where more of that monthly payment goes towards interest and times when more goes towards principle. We're in an interest rate period much like the 50s with historically low interest rates, so more of that payment goes to principle. The difference is that now the supply of houses couldn't react fast enough to the much larger pool of money available for the principle, so prices rose sharply. In the 50s we had a boom in housing supply to offset the demand and this kept prices from rising and allowed people to pay off a higher percentage of their mortgage. Now the figure of what is flowing into houses is just as high as it was in the 50s, you think people are being irresponsible because it constitutes a lower percentage of equity. The other big difference is that people have more financial assets now than they had then so other forms of savings are competing with the house. Financial assets are much more widely held than they were in the 50s. We're a lot richer than we were back then. If we weren't you and I would be having this conversation over the telephone instead of over light waves.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next