California’s housing market is prone to bubbles due to dependence on bountiful financing required to keep its high-priced housing market in high gear.
California’s latest homebuying debacle is a pumped-up storyline we’ve seen before – even if each housing bubble has its own shape and size.
This era’s price pump was the savings and loan industry, a modern spin on the quaint financial institution that had a starring role in the holiday movie classic “It’s a Wonderful Life”. The S&L experiment flopped by 1989, eventually costing U.S. taxpayers more than $130 billion to insure the industry’s deposits. And California lost its housing pump.
. many of these firms were heavily financed by Wall Street brokerages that wanted to package mortgages and sell them as investments around the globe. California home prices would plummet 59% from their May 2007 top. It took 11 years to recoup the losses.Oddly, the nation’s central bank that’s also a bank regulator was the pump for this bubble.
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