I follow most of your post except this part. Could you explain further? This seems to imply that the growth was good, the burst was the isolated problem. You are saying immigration enforcement was why illegals stopped paying their subprime mortgages??
The Housing market could be described as complex. But it can really be boiled down to
- the supply and demand for housing;
- the supply and demand for money;
- the supply and demand for risk and saftey
- assumptions that the housing bubble was different from the tech stock bubble... or tulips.
My comments on immigration addressed mostly the and demand for housing, which was only a small part of the bigger complex situation. My point was that the housing bubble burst because the strong demand to buy housing suddently disappeared.
There is a normal demand for housing from newly married couples, and other non-immigrant sectors of the market. A segment of the demand that greatly increased the demand for housing was the FLIPPERS. One could see the DonaldTrump/RoberKiyosaki (sp?) seminars move from city to city accross the country. The number of flippers coming out of those seminars could be predicted, and was by the early flippers who preyed on the late flippers. Sort of like the multi-level marketing phenom.
But the increased demand from flippers was not real. it was all based on the expectation of increased demand from some other market sector.
Starting with the Reagan Amnesty in ‘87 and growing through the Clinton and early Dubya years was the increased demand for housing from immigrants (legal and illegal). That was the real increase in demand, not the artificial increase created by the flippers. It was the decline in the real demand from immigrants that popped the bubble.
Here I’m not describing the bubble as good or bad. It was a fact, a reality. I’m just describing what popped it.
It should be noted that a large percentage of immigrant home buyers are an extended family where multiple incomes are used to pay the mortgage and other expenses of the extended family. These immigrants are pro-family in the true sense of the word. Typically some members of the extended family were here legally while others were here illegally. The prospect that the legal immigrants would not have their illegal brother-in-law helping pay the mortgage caused the legal immigrants to hold back and not buy.
It should also be noted that immigrants (legal and illegal) have a much lower rate of foreclosure and problem mortgages. They pay their mortgages (at least in IL which is where I have my knowledge).
The foreclosure problem started as a problem of 3 groups, which often overlapped each other:
- flippers
- those with adjustable rate mortgages who expected to flip or refi.
- those with problems of divorce, separation, alcoholism, drug use, gambling and similar negative traits. Of course, it was the relaxed lending criteria imposed by CRA, Fannie/Freddie that drove lenders to lend to these people with problems.
- Once the housing bubble popped and the bailouts/stiulus sucked all the money out of the private sector and into T-Bills, then the recession became prolonged. Unemployment rose and unemployment is now a major factor in problem mortgages.
But even with unemployment related foreclosures, it can be show statistically that a high percentage of those first to be laid off are those with alcohol or similar problems that cause them to have a poor attendance record at work and be worthless as workers.