red states rule
08-10-2007, 05:11 AM
This sums it up perfectly
Sub-prime politicians
Thomas Sowell
August 10, 2007
Amid all the hand-wringing and finger-pointing as housing markets collapse, mortgage foreclosures skyrocket and financial markets panic, very little attention is paid to the fundamental economic and political decisions that led to this mess.
The growth in risky "subprime" mortgage loans by people buying homes they could not really afford has been a key factor in the collapse of housing markets, when the risks caught up with both borrowers and lenders.
But why were home buyers suddenly taking out so many risky loans and lenders suddenly arranging so much "creative" financing for these borrowers?
One clue is the concentration of such risky behavior in particular places and times. Interest-only mortgages, where nothing is being paid on the principal for the first few years, enable many people to get started buying a home with lower mortgage payments at the outset.
But of course it is only a matter of time before the mortgage payments go up and, unless their income has gone up enough in the meantime for them to be able to afford the new and higher payments, such borrowers can end up losing their homes.
Such risky mortgage loans were rare just a few years ago. As of 2002, fewer than 10 percent of the new mortgages in the United States were of this type. But, by 2006, 31 percent of all new mortgages were of this "creative" or risky type. In the San Francisco Bay Area, 66 percent of the new mortgages were of this type.
Why this difference in times and places? Because housing prices were skyrocketing in some places and times so people of modest incomes had to go out on a limb to buy a house, if they expected to buy a house at all.
But why were housing prices going up so fast, in the first place? A number of studies of communities across the United States and in countries overseas turned up the same conclusion: Government restrictions on building.
for the complete article
http://washingtontimes.com/article/20070810/COMMENTARY07/108100027/1012/COMMENTARY
Sub-prime politicians
Thomas Sowell
August 10, 2007
Amid all the hand-wringing and finger-pointing as housing markets collapse, mortgage foreclosures skyrocket and financial markets panic, very little attention is paid to the fundamental economic and political decisions that led to this mess.
The growth in risky "subprime" mortgage loans by people buying homes they could not really afford has been a key factor in the collapse of housing markets, when the risks caught up with both borrowers and lenders.
But why were home buyers suddenly taking out so many risky loans and lenders suddenly arranging so much "creative" financing for these borrowers?
One clue is the concentration of such risky behavior in particular places and times. Interest-only mortgages, where nothing is being paid on the principal for the first few years, enable many people to get started buying a home with lower mortgage payments at the outset.
But of course it is only a matter of time before the mortgage payments go up and, unless their income has gone up enough in the meantime for them to be able to afford the new and higher payments, such borrowers can end up losing their homes.
Such risky mortgage loans were rare just a few years ago. As of 2002, fewer than 10 percent of the new mortgages in the United States were of this type. But, by 2006, 31 percent of all new mortgages were of this "creative" or risky type. In the San Francisco Bay Area, 66 percent of the new mortgages were of this type.
Why this difference in times and places? Because housing prices were skyrocketing in some places and times so people of modest incomes had to go out on a limb to buy a house, if they expected to buy a house at all.
But why were housing prices going up so fast, in the first place? A number of studies of communities across the United States and in countries overseas turned up the same conclusion: Government restrictions on building.
for the complete article
http://washingtontimes.com/article/20070810/COMMENTARY07/108100027/1012/COMMENTARY