how did the housing market get so inflated, and is it different from what happened in 2008?
In: 71
Some good answers here, but there’s a glaring detail that hasn’t been mentioned yet, and that’s interest rates. Tldr at the bottom.
Federal banks only really do one thing: choose how much money is out there. They do this by lowering the interest rates in the country. Private banks like Wells Fargo or Bank of America can then hand out loans at cheaper rates, hence putting more money into the pockets of everyday people.
During the pandemic, people needed money because the world shut down. So the federal bank dropped interest rates. A lot. A huge, historic amount, actually.
At this point, everyone was thinking of buying a home because why not? Those who kept their jobs had money, were stuck inside, and banks made it really easy to get a mortgage.
TLDR: 2008 was a different story. Banks were corrupt and gave mortgages to people who really didn’t have the money. 2020-2022 is different in that a lot of people had the money, and had every reason to spend it. So they spent it on homes.
Latest Answers