The topic of housing and the affordability of it has for as long as I can remember been a strenuous topic of discussion among families far and wide across America. Most of the older generation claims that with effort and hard work it is achievable, and the younger generation is simply lazy and doesn’t have the ethic to achieve it. While the younger generation claims that there is this goal that is so unachievable that the people who have purchased a house or even the home of their dreams are in a realm of their own. Through this essay I will be writing about what the movie “The housing Bubble” and reflect with my own thoughts and feelings.
Through the first part of this documentary, they spoke about how the government confuses the population into believing that there is more money available by doing multiple things. The first thing that they will do is tax the people so there is a greater amount in the central bank. The next thing that they can do is just print more money and this was also seen in the early 1900s when trying to fund WW1 because raising taxes became so unpopular. But it needs to be taken into account that printing more money this just distorts prices and interest rates. This creates a false sense of peace because the government tries to force lower interest rates because it causes people to believe that there is a greater amount of money available then there really is, so they stop saving.
The documentary shortly after goes into why the lack of saving is so detrimental and the suppressed interest rates. When interest rates are incredibly low that makes people believe that the more expensive things are much more affordable because they can afford that monthly expense. And in reality, when the government can no longer afford to keep interest rates so low they then sky rocket, this is then when the lack of saving comes into play. When the interest rates go up and people were unable to keep up with these payments, this causes people to go into debt that they didn’t realize they were currently in.
But going back to when people believed there was all this extra money in their homes, they would take out loans on their homes because the government claimed that the value of houses wouldn’t fall. Once again making people believe that they were wealthier than they actually were and people weren’t saving which later would effect interest rates that were already high but were being suppressed by the government.
While talking about interest rates and them being suppressed is important it’s also important to realize who was being allowed these mortgages. During this time period the federal government encouraged subprime lending which essentially is lending to people with a FICO credit score of 660 or less. When someone has a score of 660 or lower that means that their score is “blemished” as the documentary puts it. They don’t pay back on what they owe, this could be for medical, a loan on a car, or even a house to just name some. So in reality it would in my own opinion be considered unwise to offer a mortgage to someone who has a record of not paying back what they owe.
While this just touches the tip of the iceberg of the documentary it was interesting to get to learn as to why the housing market crashed and after watching it I would consider it to be because of a federal spending problem and not allowing for certain boundaries. When a country is down on funds in my own opinion the wrong thing to do is to just print out copious amounts of cash to fix their problems. I think they should have reworked their budget and allowed for interest rates to fall on their own instead of suppressing them if at all possible because then there wouldn’t have been a false sense of security in the wealth of the country as well as encouraged people to take saving their money into serious consideration.
I believe that it was also unwise to allow people with low FICO scores to be given such loans. It causes the people who were giving the loans away to be put in an awkward financial situation as there was already a higher chance of not being paid back in a timely manner or even being paid back at all in the long run.
So in reality the topic of housing affordability is deeper than generational wealth or even being 'lazy' and just not wanting to work. It has been an uphill battle and just having the correct timing when it comes to purchasing a home. It's been heavily influenced by the financial choices of the government and the population as a whole over generations.