The US subprime housing debacle can never be truly understood just by one factor. Yes, Greenspan is to blame for lowering interest rates too low for too long a period. Yes, there is greed, and also stupidity. In Canada, as in Britain, we also have fairly low interest rates, but no subprime mortgages. Therefore we are seeing an overall increase in house and various asset prices but not to the extend of what is happening in the US. In Britain, if house prices are bordering on the insane, then Mr. Brown better start jacking up interest rates, otherwise when that bubble pops, it could be toodles for the whole lot.

E. Long, Toronto, Canada

Anyone who has bought into or traded up in the housing market in the last two or three years must need their head seeing to. Do I need to remind you of the literal meaning of the word "mortgage"? And you want to saddle yourself with a massive debt for the rest of your lives - and in some cases pass from this mortal exisytence indebted? Get real and use some sense - stop paying ludicrous amounts of money that you can not rightfully afford. Wait & be patient.

Jez Sims, Ryde, Isle of Wight

I'm one of those sub-prime types. Bought in Atlanta GA with $0 down! no income disclosure no nothin!!! Lived in it for two years and made 4 monthly payments. JUst got evicted last month and I now rent in the same complex. IT was the cheapest form of housing that I ever knew and probably ever will. Ask me if I feel sorry for the builder, real estate agent, mortgage broker, hedge fund etc that made all this so stupid.
And the real kicker is that I just got approved for two new credit cards !!!

John Lee, Atlanta, GA

Its a bit scary on how tough it will be in 20 years from now. This article has a lot of indirect and direct relevances to a lot of countries around the world. Rent ? - might be the better option ofr a lot of people . Its just the thought of renting when retired that is the worry.

Phil, Brisbane , Australia

American sources were correctly predicting the housing problems 18 months ago. Same sources predict coming, probably very severe, recession. My solution, go liquid and reinvest when the Footsie 100 drops below 2000.

Keith Rothwell, Huddersfield, UK

Here in New Zealand we also have grossly inflated house prices. Admittedly we've only had about a doubling of property prices in the last 5 years.
We do have a crazy tax break that makes it VERY tax efficient to invest in property and a Government finance minister who claims it political suicide to introduce a capital gains tax on property; citing other countries as an example of why this wouldn't work, any way.
But in NZ like else where, property prices are a bubble, reminiscent of the South Sea bubble, Dutch Tulip mania & S.E UK crash of 1989. The only question is when will sanity prevail and houses fall back to their seeming long term average of
3.75 times average salary equals average house price.
Presently in NZ it's about SEVEN times. I do wonder if it's like a world pyramid scheme. i.e. you make some money in one country, so you borrow from the equity in an overseas property etc.
Here's hoping we ALL don’t suffer in the aftermath of the upcoming correction.

Kevin Brown, Auckland, New Zealand

I like many could care less what happens to this segment. It does not effect me at all. I rent, and I always have, raising two children along the way. Owning a home is, and has been, a complete waste of your money. If you saved the amount you put into this four sided piece of wood that sits in the yard, and rots, for 40 years as I have you would be wealthy now. Do the math!

gwk, NYC, NY

There is a saying " A fool and his money, are soon parted ". Another one " if it looks to good, it usually is ". We can only hope that the Government does not help. We all know what happened with the S & L screw-up of the 80's. Been there, done that.

Desmond Taylor, Houston, USA Texas.

My view is that the people who are most likely to feel the pain are the lenders not the borrowers. The people defaulting on loans will walk away with nothing worse than a poor credit rating. The lenders are likely to lose a lot more. There may be some very cheap properties on the market for the rest of us in the not too distant future.

Jon, lancs,

Ah, I love the quality of hindsight. It all now looks so inevitable, no? And the terminology - "sub-prime" - makes it seem as if this is a very American phenomenom when actually "sub-prime" also constitutes a huge part of the UK mortgage market otherwise known as "self-certification". The fact is that almost no first-time buyer on a standard professional salary can afford to buy in London without lying about the size of their salary.
A professional earning £40,000 a year is doing well. This, in standard mortgage terms means they can borrow £120,000 which even with a large deposit won't buy you the shittiest ex-council flat in the shittiest part of London.
We're all sub-prime these days. And instead, of writing mendacious articles like this claiming that it's all so obvious now, why are we not transferring lessons learned in the states to the housing market here?

harriet f, london, uk

Ken Blakely, rising house prices are in fact a BAD thing for the vast majority of people. Rising housing asset prices (a significant form of inflation) mean that younger workers have to take on ever bigger and bigger debts to service across their lifetime earnings (particularly bad in the current environment of low wage inflation). High house prices also decrease labour market flexibility, make it harder for young families to trade up to better houses, increase social inequality, decrease social cohesion (with more people at the lower income end locked out of the housing market), and constrain consumer demand long term (by constraining disposable income long term). Rising house prices are only good for those who are leaving the housing market -- to downsize or move to an economy with cheaper housing stock. It's a great mistake to think that house price inflation is a form of real wealth -- it can only be realised when a house is sold, and until then makes most of us poorer, not richer.

Isabel, London,

It would be really useful to know what the NEXT disaster is going to be. I would suggest commercial property as an investment for retail investors in the UK.

Frank Upton, Solihull,

In response to this article and to F. Coffield's comment- "I live in Atlanta Georgia and what happened here was insane. ..... People were buying $200-300K homes with $40k jobs. " I'd like to add (as a British research scientist working in Oxford on £23K p.a.) that in the UK, a one or two bedroomed flat (not even a house) here is £200k plus.

The high house prices may be bad in America, but in Britain it really is "insane".

V Jones, Oxford, UK

The vicious cycle is only now starting. Many US homeowners aggressively tapped home equity to fund their lifestyles. This ends when home prices stop going up (they don't have to come down at all). Once this stops, discretionary purchases slow and people start being laid off. This leads to more borrower distress and greater entrenchment of consumer spending, ultimately to an unwillingness to pay more for housing. The current problem is so bad that if housing prices retraced to only year 2000 levels, there would be $0 home equity in the entire United States. In other words, fasten your seat belts it is going to be a bumpy ride.

Joe, Minneapolis, MN, USA

"...The subprime market actually caused the prices to rise on all homes....", which was a good thing for the vast, overwhelming majority of people.

Ken Blakely, Blandford, UK

Mr. Brooks rightly mentions the horrendous increases in insurance rates for Florida home owners, always assuming one can find an insurer. There are also huge property tax hikes for owners of holiday homes, these are not capped at 3%, as is the case for permanent residents.
These factors, combined with the repossessions which occur daily on the Treasure Coast, mostly because of the greed of 'sub prime' lenders, have resulted in a glut of unsold homes. The boom is over, too few jobs are available for people to be able to afford mortgages, visitor numbers are decreasing, revenue is falling. All signs of a severe downturn in the economy.

Joan F., Port St. Lucie, Florida. U.S.A.

The US housing market is stabilised by the fact that most existing homeowner mortgages carry fixed 30-year interest rates of between 4-7% . As for describing ARMs as foreign to the UK experience: if "sub-prime lending" is described as the granting of 100% mortgages for imprudent multiples of income at unprotected variable rates, the term could probably describe a large proportion of existing UK homeowner mortgages. This should give pause to anyone who weathered the 1989 UK property crash (when floating interest rates reached 15%), or the large sector of perfectly creditworthy UK homeowners whose monthly incomes are already consumed by variable rate mortgages at current floating interest rates of 5-7%.

Katherine, Maryland, USA

I live in Atlanta Georgia and what happened here was insane. The subprime market actually caused the prices to rise on all homes. People were buying $200-300K homes with $40k jobs. There were homes sold for 0 down or $500. Many of these homes were also townhomes which also had monthly Condo fees. People were qualified for these loans with very low interest rates. So now there are so many foreclosures that the resale market is horrible. Also many those who are in homes they can no longer afford are unable to sell them. With very rare exception, all one now has to do is pick any neighborhood or new development to purchase a home. It is all very scary. If you are a buyer wait a few months and you will get whatever you want at a price you want. Sellers - - be prepared to wait or sell at a reduced cost.

f. coffield, atlanta, georgia USA

As an economist I have never understood why Greenspan has been so revered by the media. He presided over the internet bubble and now the housing bubble. His irresponsible abdication of the Federal Reserve's prudential supervisory role has left the US economy in much worse shape than when Paul Volcker retired.

Ian, Myersville, MD/USA

For the US Gulf States the sub prime mortgage problem is being compounded by the rapid rise in home owners insurance premiums, caused by the large number of major hurricanes during 2005.

P.Brooks, Palm Bay, FL USA

Greed could bring America’s housing sector to griefGary Duncan, Economic view
Greed greed greed greed.
That is what the USA is always to lead the word by the greed. Have democarcy all over the worild, greed in the ENRON, GREEN now in DELL , Sec chacks the greed. Has the tummy of the greed not filled up to the brink to stp this money making machine to a level when people can live happily I mean less geed and more fun?

Firozali A.Mulla MBA PhD, Dar-Es-Salaam, Tanzania

I am in complete agreement with Mr Duncans assesment of Americas sub-prime mortgage problem. What bothers me most as an American, most Americans do not see it nor care. On top of that the politicans could care less and the very wealthy see an opportunity to buy low and sell high. Many Americans do not know they live close to third world standards and will be headed even further down that road. Middle class America is not in as good a shape as middle class western Europeans. It seems we in America are willing to sell out while still believing the hype we have the highest living standard in the world. By the time the dust settles from the sub-prime meltdown, maybe, just maybe we may wake up and demand more of our government instead of them demanding more from us.

Hulton, Carol Stream, USA

No-one in the UK should be complacent and view this as an exclusively US phenomenon. Exactly the same trend towards sub-prime lending has happened here during the recent housing boom, with self-certifiable mortgages, loans for 120%+ of the value of a property and lending to people with unstable incomes or bad credit histories. There is nothing to say that a sub-prime meltdown isn't headed this way across the Atlantic.

But no, I'm forgetting: property is always a good investment, it only ever goes up in value and you can never lose if you invest in property, or so we'd led to believe when reading the mainstream media in the UK.

MB, Edinburgh,

It is nothing new. The banks do it every time, this time it just took a lot longer for their short-term greed to catch up with them. Remember the Savings and Loan scandal of years ago? The banks and their shareholders deserve to take a beating when all of the 'monopoly money' - and lets face it, that is practially what it was - that they loaned does not get paid back. Stability of price in housing is much more preferable than what we have had on the way up and now on the way down.

Robert, Portsmouth, New Hampshire