Open Thread

As we watch the Fed and Paulson desperately try to either nationalize Bear Stearns or get it merged, I am led to wonder why it is that main stream media articles keep avoiding a basic, fundamental truth about the housing bubble – they keep trying to insist that bubblicious housing prices are somehow justified, that sellers are somehow entitled to peak bubble prices and are justified in their expectation of receiving such prices, and that the only reason why housing prices are currently being threatened is because of a lack of credit. Ha! What about that 800 lb elephant sitting in the middle of the editor's office; what about income? What about the fact that the only way people could "afford" bubble pricing was with NINJA loans and the like? Why isn't income-based affordability ever given any serious consideration?

Besides, credit really isn't all that threatened especially now that the GSE conforming loan limits have been raised to absurd levels (at least here in California). Sure you can get credit; it's available to anyone who can make a hefty down payment, can prove their income, and who doesn't spend more than about a third of their gross income on the mortgage (or no more than about 40% or so on all debt combined). What's the problem? Seems perfectly reasonable to me. The "problem", of course, is that since bubble-inflated prices are based on the exact opposite of these more traditional lending criteria, bubblicious prices cannot be supported unless one of two things occurs: 1) prices come way down or 2) everyone gets a 100%+ raise. Personally, I would prefer the latter but I am not counting on it.