The housing price conundrum | Current Economics | Finance & Capital Markets | Khan Academy
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- Опубліковано 14 бер 2008
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Why did housing prices go up so much from 2000-2006 even though classical supply/demand would not have called for it. Created by Sal Khan.
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Thank you for putting this out there. It's a shame more people haven't found it.
What an amazing video series. I'm watching it 15 years later and still the best explanation out there
same
same
Sal you're a genius, the best teacher I ever had
There are so many other demand side factors other than just population and incomes, such as the supply of credit, tax breaks, and the big one... Speculation!
If you read the description, it will indicate that the demand side factors were from classical economics. Im not too familiar with classical economics, but i doubt it takes the factors you mentioned into consideration, true as they may be. Cheers friend :)
I'm pretty confident that those factors would decrease the change in demand, and if it increased it, I doubt it would match the 6% supply increase. The housing market façade is a joke used as a revenue source for banks.
Yea that s why it doesn't make sense for the price to be so high, he gonna explain it in later video
This was a great series. It's unfortunate that few people learned the lessons from the aftermath of the Great Housing Bubble.
How so? I believe EVERYONE in finance and home owners across the states learned a hard, hard lesson about gambling on a "sure thing."
MadDog MikeG might have learned, but they didn't fix anything. Americans still straddled with enormous amounts of private debt.
You are right, but he explained it in the next video, for example, downpayment drop from 25% to 10%.
fascinating. thanks for sharing your thoughts.
I am amazingly thankful for your generosity in sharing these videos. Can you please tell me where I can find some of these statistics that you've shown in this video?
Thanks!
Sal!!!! I am studying your Dif Eq videos, so I had to laugh a little when you pulled up the calculator to figure 1.8 * 4. Haha, you're doing a great job my friend. Keep up the good work.
nicely done!!
Just heard you on KCRW... Great interview! you have gained a fan!
I think Sal nailed it. You make a good point about community increasing value. I bought an empty lot in Andahuaylas, Peru and the value tripled because they built a university next door. No buildings just an empty lot.
However, that happens always and everywhere but it sounds like this happened because these HUGE hedge funds needed places to stick their money. These securities got hot and it spiraled out of control. Hedge funds are dangerous in this way.
Hey Sal,
It would be really awesome if you did a section on Health Insurance.
Is that even possible?
:)
Good presentation. You are the first person that I have heard that has Mentioned the law of "Supply and Demand". The US population increases 1.2 million per year which means that per year less than 1 million homes can be sold. Yet they built 1.8 million homes per year.
There is no doubt that there was speculation involved with the increase, however, all of the factors are not being mentioned in this video. Things like: an aging society (people moving out of their parents homes), social norms (it being more and more accepted to get a divorce therefore instead of a family living in one house, they have two), and urban-sprawl / suburbanization are most definitely also worth mentioning. Thanks for the upload -- love the videos!!
I didn't see your next video yet, but it seems to me that the other demand factor that you should have listed was credit availability. For the time period that you mentioned, credit standards became extremely lax, and mortgage backed securities flooded the market with cheap capital to fuel demand.
Where can I download the transcript?
People already there who rent; trust funds; corporations; the shadowy central bank sheisters that create our currency out of thin air and then have the gall to charge interest on it - lots of people can buy houses not just newcomers. Get you thinking don't they these vids; very good khanacademy!
Well said. All the things you said go into bottom line of the price of a house, including artificially low interest rates. Even without speculators, the prices would rise because houses are normally sold on the basis of what kind of monthly payment one can afford. Once rates go up to fight inflation, America will be hit again. Of course, like you mentioned, speculators made the problem worse.
3:26 - Let me see if I can get it up...
Even though the table had monthly values, I think it showed the effective annual rate for each month.
Hi Sal....hats of to you !!!!!!!!!!!!!!!!!!!!!!!!!!!!!
You are awesome !!! Your explanation is "SIMPLE" and to the earth. You are giving this hard-earned knowledge to public for free!!!!!!!
YOU will find yourself in heaven when it's time for GOD to decide where HE relocates you!!!...
ALL the BEST!
I learned a whole set of new Mathematics and Logic...thanks to your VIDEOS!!!
I am already subscribed and eagerly waiting for anything new from your end!!!!
GOD BLESS YOU !!!
7:20
well some Hurricanes such as Katrina destroyed a lot... but compared to 1.8mil a year, still negligible i imagine.
Houses are depreciating assets. Nominal value is not the same as real value.
(a little off topic) But what kind of jobs can you get with a econ major?
The drivers you mention would only matter if there were changes in them. The divorce rate did not radically change, nor did the crime rate, during that period. If they had an effect, you would expect them to change in order for the housing costs to change.
Well housing is among the most basic of survival needs being shelter. The demand will never run dry leaving little need for thought of price negation in a downward slope, and why a price ceiling can not be effectively reached.
there is also a captive market, since pretty much every municipality in this country has made living in cars&RVs illegal
Isnt it a mistake at 5:00-5:30 ish where he summarises the NYT article? Population grew, income per capita fell, so total "money available" fell 3% not 1.4%. 1.4% was the drop in income per tax filing.
In addition, the media and realitors and the make money in realestate get rich quick programs all said housing prices will continue to rise. So people saw it as a money making opportunity.
One could also argue that Real Estate Investments displace other Asset classes, ie instead of buying stocks and bonds, people were buying Real Estate.
@vickiormindyb LOL!!! "My income sure as hell didn't go up"!! That's funny!
Please redo this video!!!
who is the teacher ?
So the population RAISES average income?
cost of material to build a house ? check the metal prices !!
You're letting congress off too easily. Glass-Steagall should have never been repealed by Gramm-Leach-Bliley, and to top it off, they never, NEVER should have strengthened the Community Reinvestment Act while at the same time allowing insurance, investment, and holding banks to consolidate.
People were buying homes as investments instead of buying them for themselves because no down loans were available.
the entire thing of "housing prices go up" is a patent lie. Housing prices depreciate, constantly. However, that depreciation is slower than inflation. So if you revisit the whole prices go up, and keep inflation in mind, you'll find they go down.
All the flipping houses fucked everything up, the houses are way too overpriced compared to income. Also the housing dirivitive are another money leak. What a friggin joke real estate is it's gambling that hurts everyone.
Equity?
@MrROTD Cheap money lending caused the housing bubble. You can thank the fed for that.
in 2022 things are even worst
...More - Here's a novel though. Maybe the world doesn't need the Billionares' money. If we needed it, it would be used effectively and markets wouldn't get distorted. It sounds like the billionares need a place to invest their money more than the world needs to use their money. Hmmm, too much money in the system, I think I've heard that before.
I think something is wrong in the explanation, the base should be the same for both the parameters. The population of US in 2000 was 282.6 million and rise of 1.5% in 4 years renders population to grow by 4.239 million, while even the average income of top 1% was 392,557. One figure is in millions and the other in '000 thousands, it seems illogical to combine the percentages of both since the base is not the same. and then compare to the number of houses in percentage terms. Sorry, but not buying it!!! Please clarify
arjit gupta Sir u r a genius
Yes there was more money out there. It was created by the FED. And they made it irresponsibly easy for us to get it. We were willing to go into debt because we thought we had equity in our homes and the media and realitors and the make money in realestate get rich quick programs all said housing prices will continue to rise. Boy, you serries on banking was so good and the central bank model seemed so effecient. But now I'm seeing them more as a threat.
4:39 Poputation
According to the author of Rich Dad, Poor Dad, houses are a liability, not an asset. One can currently find the audiobook on youtube. Education is power.
What do you mean "if you buy the supply and demand argument". Isn't supply and demand common sense? Another thing that would drive demand is peoples willingness to dip into savings. Or in this case dip into equity which was a mirage thanks to the Fed generated housing bubble. Sorry, corrupt politics makes the central bank design unworkable.
here is your answer Clinton was president in 2000 bush was president in 2006
??? You would have to specify how each affected the market.
Too simplified