Thursday, October 2, 2008

Buy a California home every 20 seconds since Greenspan promoted alternative mortgages

For the price of the Iraq War, we could buy a California home every 20 seconds since Alan Greenspan gave his speech promoting adjustable rate mortgages.  

It has been 1683 days, or approximately 2.42 million minutes since February 23, 2004, when Alan Greenspan gave a speech titled "Understanding Household Debt Obligations" to the Credit Union National Association.   In the speech, Greenspan promoted adjustable rate mortgages and called for "greater mortgage product alternatives to the traditional fixed-rate mortgage." He claimed that rising debt-to-income ratios were not signs of "increasing household financial stress."

The median price paid for a California home in August was $301,000, down from $465,000 the year before.  (Half this drop is from depreciation -- the other half is from changes in the kinds of homes selling.)  Buying a California house every 20 seconds since Greenspan's speech would cost $2.19 trillion, which is less than Joseph Stiglitz and Linda Bilmes' estimate of $3 trillion for the cost of the Iraq War.