This is excerpts from an op ed piece written by Steve Hodgkins. I’ll throw some comments in to explain/clarify what he’s saying and why I don’t agree with a large portion of it.
The decline in single-family home values is the predominate reason for the current economic collapse……
Tom here – which came first, the chicken or the egg? Did the subprime mortgage lending boom send housing prices way too high because credit was too easy? Or did housing prices fall because those loans went bad? Or both?
Falling values have decimated the single-family construction industry, which normally supplies roughly 16% of the gross national product of the United States……
At the height of the housing boom, developers and home builders were buying land, developing lots and building houses based on an economy fueled by subprime mortgages.
They neither asked for nor were even aware of this giant social experiment conceived by our political leaders and the heads of mortgage giants Fannie Mae and Freddie Mac.
Tom here – so they didn’t ask for increased lending? They weren’t even aware of the fact that lending was significantly more lenient than it was before? They are saying that they never lobbied for easier lending? I’m sorry I’m not buying it….
As entrepreneurs and job creators, home builders were simply responding to perceived market conditions. Likewise, their banks and financial partners were making decisions based on historical market data.
Tom here – “making decisions based on historical market data?” So he’s saying that the sudden relaxation of mortgage guidelines was based on historical data? How does he figure that? I’m absolutely positive that I’m not the only mortgage lender who said, “Wow, I can’t believe that Fannie and Freddie will buy this loan…..”
After the subprime loans were pulled out of the marketplace, builders were left with large inventories of land, lots and houses and far fewer buyers who were able to qualify…..
Tom here – I’m not sure that it’s quite an accurate description of the market dynamics. Did the subprime mortgages get pulled or did buyers stop buying a new home because prices have gotten too high and the increase Read more