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(The Year 2012 In Review)
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|User Info||That Is Not Rain (Peter Orszag); entered at 2012-05-02 13:12:42|
Registered: 2007-10-21 Arlington, TX
Back in 2000 stocks could only be leveraged 100%. But even at that time, you could easily leverage housing 400% or more. By 2007 2,000% leverage was common on new loans and zero down effectively applied INFINITE leverage. Just with those numbers, the difference should be obvious.|
Then there is the broadness of participation. The percentage of people who had significant stock portfolios is 2000 was much smaller than those whose houses represented a significant part of their GROSS portfolio in 2007. The degree of participation on the lender side was much broader with housing also. Most banks didn't have any material lending against stock portfolios but nearly all of them did in either residential or commercial RE or often both.