The law of unintended consequences

I'd been meaning to write a post on this theme for some time, but Marin Real Estate Bubble beat me to it.

"Housing affordability" has long been a goal for politicians of all political stripes. The solutions have ranged from the creation of monstrous government departments (HUD, FHA) to quasi-government companies (Fannie Mae, Freddie Mac). More recently, the solution has been "creative financing," including no money down, no documentation, and pay-option ARMs.

So what have these "housing affordability" efforts done to housing affordability? Before all this, families used to be able to buy a house with a single median-income earner and a 30-year, fixed-rate mortgage. Now, families struggle to afford a house even with two incomes. And it's worst in the states with the loosest lending standards.

The law of unintended consequences. Learn it. Know it. Live it.

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