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HeadSet saysThe government backing allows too much easy money which is what drives up prices. Without government backing, the irresponsible borrowers would not be able to bid up prices. The only people in the market would be people who saved up the down payment and then the houses would be affordable enough to buy with a 10 -15 year loan.
All that would do is create more landlords and higher rents. That would increase inequality and hurt the middle class. Housing prices would not fall much because anybody who is no longer a buyer becomes a renter and drives up the rental cost. This means investors can and will pay more for housing.
That's nonsensical. Banks loan out money as an investment and only do so when their analysis shows it will meet an ROI and generate profits. They will not make unprofitable loans just because they have additional money.
It's the same as when government encourages women and minority to buy stocks at the stock market cycle peaks.
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https://www.marketwatch.com/story/housing-market-now-reminds-me-of-2006-robert-shiller-says-2018-10-30