Actually what killed the housing market was a bazillion home equity loans. Sure, there were some homes bought by people who shouldn’t have (particularly in California), but for every one of those there had to be hundreds of variable rate refis. There were even tax professionals advising an upper-middle class acquaintance of mine and her husband to keep debt on her house for the write off. She laughed at me when I told her in 2003 or 2004 to avoid new debt on her already mortgaged house!
“Actually what killed the housing market was a bazillion home equity loans. Sure, there were some homes bought by people who shouldn’t have (particularly in California), but for every one of those there had to be hundreds of variable rate refis”
There’s a good deal of truth in what you say.
UCLA had an economist at their Anderson forecasting center, Chris Thornberg, who was warning of an impending crash as early as 2006.
One of his reasons is that the entire growth in the California economy after 2001 was equal to the amount of home equity withdrawal. It was a huge red flag.
The booming consumer spending was being fueled by new housing debt. If and when housing prices just leveled off, not to mention going down, the whole game would come a screeching halt.
This data was out there for anyone who wanted to look at it. Too many people had a vested interest in the bubble to pay any attention.