Front page WSJ article today makes for intriguing reading: U.S. Mortgage Crisis Rivals S&L Meltdown
For those of you w/o access, check out the informative collection of charts at WSJ.com (public) on: Home Ownership, House Price-to-Rental Ratio, Commercial Paper, Prices of Subprime Mortgage Tranches.
As this chart reveals, starting in late 2001, the price ratio of renting vs. buying broke out of a multi-decade range. Cheap money, and an apparent lack of lending standards put millions of renters into houses that, based on today’s foreclosure levels, they could not service (i.e., afford).
Hence, the massive unwind as these home owners return to renting status . . .
HOUSE PRICE-TO-RENTAL RATIO:
Ratio of OFHEO house price index to personal consumption expenditures on rent
Fascinating stuff . . .
U.S. Mortgage Crisis Rivals S&L Meltdown
GREG IP , MARK WHITEHOUSE and AARON LUCCHETTI
December 10, 2007; Page A1