Neil Howe: It’s going to get worse; more financial crises coming

[pbrower2a]

A huge chunk of American income goes into rent. It used to be a canon of real estate lenders that it was unwise to buy a house unless the cost of the mortgage loan is more than 35% of the person's income. Even with a new home that implies insurance and taxes as reliable costs (for which lenders typically required an escrow account). Rent was of course to be much less expensive as a share of income because it has no quality of investment.

In California, many people are spending 60-70% of their after-tax income on property rents just for the privilege of being near their places of employment. Should rental rates crash, then goes a big chunk of the economy even if life gets better for renters. California is a slumlord's paradise in part because property taxes (thanks to Proposition 13) are low.

Near-zero interest rates keep the financial cost of owning mortgaged property (and many apartment owners borrowed to build) low. Low property taxes mean poor K-12 education.

Ask a tenant how his life would change if his rents fell by 20%... it would be a windfall. A crash for some is a better life for those who have been gouged.