There are many occasions when I wonder just how serious was this credit crunch. Here is a good example - US real estate lending by banks.This chart tracks the annual change in real estate lending. Currently, it is running at about 6.4 percent. Moreover, at no time did it ever actually decline. As such, it was always possible for US borrowers with good credit ratings to get new mortgages.
10 comments:
And this is on top of massive declines in prices.
The CRE crash probably isn't in these Fed figures.
Newsflash for Alice: consumer property loans are not the only type of credit in this world.
This will probably offend many people, but to be frank, nothing, and I mean nothing, close to hardship, difficulty or recession has occured from my perspective here in London. The economy booms as usual, people are cashed up, stuff is going on, food in the shops, people doing deals, living, thriving. 90 percent of this recession is a media hysteria.
Unless house prices - which are a real cost of living - are included in the inflation measures which are considered by interest rate setters, credit for house buying will be too easy and housing prices will not follow a steady trend - i.e. there will be uncomfortable boom and bust, rather than more gentle oscillations.
I doubt that oscillations can be stopped, but excluding house prices from the inflation measured on which policy makers focus makes the 'system' more inherently unstable.
Why would 'smart' folk generate genuinely valuable products when easy money can be made riding asset price booms selling and trading mortages etc. on commission, with taxpayers sometimes having to step in to clear up the mess?
B. C.
These figures are frankly incredible. US real estate has totally collapsed. The idea that loans have increased over the last two years is absurd. So what's the catch?
The title says "loans by US banks". But the vast majority of loans were made by non-banks eg Freddy Mac and Fanny Mae, who have stopped lending.
Could the Fed be trying to mislead you Alice?
TimG
Tim G
The US housing bubble was so crazy and all it took was a return to more normal lending standards and house prices came crashing down 20 percent.
In other words, it didn't need a credit crunch to puncture the bubble. All it needed was a return to sanity.
Alice
Seems like good news. Mind you they have had a lot of housing issues.
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