Could Another “Big Short” Be Happening In the Housing Market?
After watching the movie, the Big Short (2015) this past weekend, I kept asking myself, “What is stopping another housing bubble from happening again?”.
Banks have always been greedy and the rating agencies on the mortgages will always have competitors with one another. This film was loaded with stars. Christian Bale, Steve Carell, Ryan Gosling, Brad Pitt among others.
For all of us who had no knowledge of how banks work or mortgage terminology that only home-owners have, this movie did a great job explaining everything in short little pieces headlined by Selena Gomez, Anthony Bourdain and others explaining the nuances of the housing bubble that occurred in 2007-2008.
With that being said, the banks ended up getting bailed out and recession occurred with tens of thousands of people losing their jobs as a result. Ever since then the market has increased dramatically as our late millennial generation (1990-1995) has struggled to be able to own homes, we are renting now more than ever.
In the MetroWest market, I have noticed that since 2010-11 prices on houses have dramatically increased as a result of a lot of people looking in this area but not enough sellers. Simple economics will result in people willing to pay above market to own a home in this area.
The question I have, is this happening across America in areas around big cities, where the job market and growth is expanding? What is stopping the banks from taking advantage of this market? And will it ever slow down? $400,000 houses are now $500,000 houses. $500,000 houses are now $600,000+ in this market. They are all roughly $50,000 to $100,000 over price for a middle of the line house.
During the movie, it was interesting to see if greed could ever come back again to haunt the banks and rating agencies, I would believe there would be restrictions in place by the government after this had happened.
-Nick Sutherland (@Sudsy8)
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