post-2000 upswing is mostly due to the change in mortgages shifting from 20% down fixed rate 30-year ones to zero down, negative amortization, and second mortgages for the 20% downpayment. This opened up the housing market to those who couldn't afford to save the 20% downpayment.

Not going to dispute your basic point, which I read as that mortgages became easier to get, and many people got mortgages who shouldn't been able to get them and wouldn't have a few years earlier.

But some of the elements you talk about existed before 2000. Adjustable rate mortgages (which you don't mention, but which get a lot of the blame) have been around since at least the 1980s. (For years, Alan Greenspan said, in effect, that you were an idiot if your mortgage wasn't adjustable.) But interest rates generally trended steadily downward between, say, 1980 and a couple years ago. Which means that, if you got an ARM, you made out like a bandit. The last few years, not so much.

Lower downpayments are also not new. We paid 5% down in 1992 and had to get private mortgage insurance until our equity hit 20%. (And to connect with my first point, we got 8.50% fixed then -- and our friends told us we'd done well. In 2003, we got 5.75% -- and a lot of the "Save Thousands on Your Mortgage!" come-ons we get advertise higher teaser rates.) Home equity loans and lines of credit -- which technically don't affect the down payment but do reduce your equity -- have also been around since at least the '80s.

If anything's really new, it's the rise of interest-only payments and emphasis on subprime borrowers and increased use of mortgage brokers. Even securitization (bundling up loans and selling pieces of the package to investors) isn't all that new.

This opened up the housing market to those who couldn't afford to save the 20% downpayment.

This is also reflected in the drop in Americans' savings rates.

While I agree that savings are down, in the So Cal market cheap houses have been going for $500,000. 20% on that is $100,000. Even with excellent saving practices that's extremely difficult for most families to come up with. When I actually thought I might buy a house a few years ago, I was looking at places in rough shape that were listing at $750,000. There's no way I could have come up with that kind of down payment.

The MLS did a map or something of Los Angeles so you could see price change by neighborhood. In a lot of the popular neighborhoods, prices have stayed steady or, in some cases, gone up slightly.

ION, this is what people were amazed by in 1929: Air-Rail Line Spans America in 48 Hours (Nov, 1929)

They'd stick you on a plane during the day and on a sleeper train at night, allowing you to go coast-to-coast in the unheard of time of 48 hours.

I guess, though... that even having a lot more people willing to buy rather than rent, how does that change prices? Because, people who don't buy still rent, right? Unless there are millions of people who had been previously living in their parents' basement, or the population has actually increased a lot.

So, like, in 1996, two houses go on sale, one of them sells and the other one gets rented. In 2006, they both sell for eleventy zillion dollars. In 2010, neither of them sells and they both get rented.

Is this whole price crisis caused by people being unwilling to be landlords?

You probably won't be able to rent a place at the cost of your mortgage.

I know that a lot of the homes here in SoCal that are in foreclosure are actually occupied by tenants. So I would guess that the rent isn't covering the ARM payments in some cases.

Also, as the housing prices fall, the amount of rent that can be demanded for properties falls. I was checking rental listings recently and lots of houses are now renting for much cheaper than what the mortgage payment is, so folks are losing lots of money even on rentals at this point. That path also leads to foreclosure and now the renters are also out of a house.

I don't know about SoCal, but there are a lot of newish mini mansions that won't be rented out for this reason. Rents on du/tri/fourplexes run from $650-$1200, an older home (bungalow, probably only one bathroom) is $325,000 at the low end. The newer monstrosities are half a million easy.

So, if you can afford to buy, are you going for the cheaper bungalow, and if you decide to wait and just rent are you going to pay the cheap rent or the one that covers payments on a $500,000 loan?

I forget the exact casual link, but there was a renter's index floating around that showed that they were being hammered also. Let's see if I can dig it up...