“The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit,” says the Washington Post, and some people fear that will lead to another housing bubble. In fact, there are going to be more housing bubbles; the Obama administration is contributing to them; but not through policies promoting subprime lending.
Neither subprime lending nor other federal policies caused the housing crisis that led to the 2008 financial crisis. Too few people understand this because they still view U.S. housing as a single market. But unlike labor or food or cars, housing is not something that you can easily pick up and move to somewhere that may place a higher value on it. Oil can be easily and fairly cheaply transported, so there is a world oil market; but housing markets are strictly local.
Nearly eight years ago, Alan Greenspan famously said the United States was not suffering from a housing bubble. He has take a lot of heat for that, but he was right. His exact words were, “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”
