Friday, September 05, 2008

Mrs. Scholar's September column 

This time about housing.

As history shows, manias for certain assets at some point become collectively irrational, as people buy on the expectation that the item will keep going up in value.

Housing bubbles operate on this assumption, and although both political parties believe home ownership an unalloyed good, encouraging folks to assume a large amount of debt makes them vulnerable to vicissitudes of the market. For example, if a couple buys a home for $200,000 and puts 5 percent or $10,000 down, and the home value decreases to $170,000, it is easier to give the keys back to bank ...
I barely had time to read this before she sent it in, and yet she gets the basics pretty well.

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