by mos6507 » Fri 19 Feb 2010, 21:23:23
$this->bbcode_second_pass_quote('TheDude', 'D')ata up to 2009 Q3. What happened to the rest of personal spending, how much of a hit it took from debt, is something I'm still looking into. Or looking for someone who's done all the work, rather.
I don't think the data is granular enough. The theory is that housing tanked because the gasoline portion of people's monthly finances pushed them over the edge,
not the ARM resets. So the idea was that they would have been able to (and willing to) either continue to pay their mortgage or flip it to the next sucker (with no end in sight to the bubble) if not for gas prices.
To establish causation you almost have to sit everybody in the US down and open their bank records to see how they were managing their money, and whether they even had a hope and a prayer on paying the ARM after the reset.
What I'm going by are things like the Dateline NBC piece that actually showed real-life examples of people who never should have qualified for these loans having got them. In some cases they thought they were gaming the system, and in others they were just kind of clueless for not reading the paperwork. They then scrolled through the spreadsheets of loan applications to show that these types of losers were actually the norm, not the exception. The income data was often falsified somewhere along the line in order to get the approval and the AAA rating. This was a comedy of errors at all levels before you even factored oil into the mix.
So I think the number of people who were planning to be good little homeowners and to scrape by being house-poor after the ARM reset and the mortgage jumped by $1,000+ if not for an extra $20 a week on gas were the exception, not the rule. It's was pretty easy to cut discretionary spending enough to compensate for $4 gas, as scary as that figure may sound, but not so easy to scrape up enough money for the mortgage. It was the foreclosure shockwave that was the main driver in the recession, not the household economizing due to high energy costs.
I think the slowdown on the buying end was not driven by the unavailability of credit but by the natural endpoint of the housing bubble. Prices had reached their ceiling and another round of flipping the house to the next sucker was not going to occur regardless of gas prices. Places like Phoenix were already crashing and burning long before oil went over $100/bbl.