I’m a first-time home buyer – or looking to buy anyway – in one of the most expensive markets in the country, San Francisco. Housing here was already pretty pricey in 2000, but ballooned out of control in the frenzy of the following years thanks to low interest rates and the availability of cheap money and interest-only loans. Now, it costs double to buy in some neighborhoods than it did when I moved here 8 years ago.
My question is this: How much of this inflated market was caused by real supply and demand issues and how much was built on false premises that opened the floodgates of homeownership to people whom we now know could not afford to buy (because they are foreclosing now)?
What I’m getting at is the problem now really is affordability – not a crashing market. Inventory is still moving here. Prices have come down a tad, but we’re still looking at an income vs. cost of housing ratio that is out of whack. (Here anyway – every market is in a different situation.)
With that in mind, shouldn’t our politicians be focusing on fixing the affordability problem rather than fixing the bad loans with solution plans like this one reported today by the NY Times?
Let’s take a long-term approach over the band-aid fix.
Is there a way we can learn from the mistakes of this housing disaster to keep the costs of living within reach for hard-working families who made levelheaded financial decisions? Can we figure out a way to use the shrapnel from the downturn to create real affordable housing that is not just another contained “projects” area of a city?
I realize it’s idealistic in nature, but love the discussion…