"There was an enormous, record-shattering bubble in residential real estate. Prices rose to previously unimaginable heights in comparison to local incomes (which dictate what people can afford to pay for a home) and rents (which represent the "competing product" for having a roof over one's head).
Homes got so expensive that it was only possible for many people to afford them by taking on highly risky mortgages that traded lower initial payments for much higher eventual payments.
Once the speculation among home buyers and lenders came to an end, there wasn't a whole lot of question that home prices would begin to make their way back to levels that could be justified by true economic fundamentals. And so they have.
The current housing crash has one single cause: the speculative bubble that preceeded it."
- Rich Toscano, Voice of San Diego, March 2008
March 16, 2008
HousingPANIC Quote of the Day
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13 comments:
Say what you will about the pig-men and the six-percent REALTOR®s, I still lay the blame squarely on the debt addicts, the users, the HELOC-fed, greedy homedebtors.
None of this would have been possible if they had not thrown away their own common sense and joined the stampede.
The deflationary depression we face now was earned, one cash-out refi, one interest-only ARM, one $100K kitchen at a time.
http://deflationland.blogspot.com
Finally the truth comes out of someones mouth.God bless san diego.
Amen Christian!
I have said this all along as well. Blaming the NAR or any realtor for any of this is silly. Realtors are nothing but middlemen/salesmen. They don't force anyone to buy, the just take a cut of the action. Blaming a realtor because someone bought a $500K house on a $20K salary is the same as blaming Best Buy if someone bought a $5000 TV on a $20K salary. Both are supid decisions but you can't blame the salesman.
So obvious out of the gate on bubble blogs, and yet still not realized by the majority who still think their inflated values are a "right".
But in the dim TV-medicated simian brain that is the American public, an inkling of growing danger is finally taking root.
Read http://tinyurl.com/22v2xa. I love this part: "But if you choose to buy now, you will not only be in the driver's seat during the buying process, you will also reap the gains of price appreciation once you become a home owner." You'd have to wait a hell of a long time before your house just breaks even (especially after transaction costs) to the price you paid if you were to buy now, let alone reaping the gains of price appreciation.
Rich Toscano is awesome. His site (Piggington's) was the first place I saw plots of price-to-income and price-to-rent that made the problem blatantly obvious. Unfortunate our political leaders and the mainsream media weren't capable of performing similar analysis or giving his analysis its due credit, when this enormous bubble was being pumped up.
I don't know about not putting some blame on the real estate 6 per centers for all this fraud and cash back crime .It takes a real estate person raising the price of the listing to get the cash back . Realtors double escrowing real estate transactions to raise the price is another form of fraud to the lender/appraiser . Another form of fraud is fake bidding to get buyers to up their offers .If any of you people ever saw Realtors/salespersons codes, as well as business law ,you would not say that the real estate sales people are blame-less .The false advertising and fear advertising of the Real Estate trade groups were and still are a shame and really false advertising . "Buy now or get priced out forever ","Real Estate always goes up","Now is a good time to buy ",You can't afford not to buy ","Just refinance later ","We are running out of Land" ,are examples of false investment advice
.The real estate sales people were cheerleaders for the bubble and faulty fraudulent lending . The real estate agents should of said ,"Get in now before the lenders start preventing fraud ."
If a party was going to make a 6% commission for sitting up a deal with a crooked lenders agent, than they are partners in crime .
One of the jobs of a real estate agent is to screen buyers for qualifying and only show property to them that they can afford .This job is suppose to be done for the benefit of the sellers to not waste the sellers/lenders time with escrows that would fall out .The job of the sales agent is not to find crooked mortgage agents that will commit fraud ,lie to the borrowers ,and cram the deals through the corrupt system.
The real estate sales agents knew that it was a gravy train and a speculation bubble ,and they sold property based on faulty "myths" thats the newspapers were publishing because of the ad revenue.
When you promise a borrower that they can refinance out of a toxic loan ,after they make appreciation, because" real estate always goes up ",you have given them investment advice that is fraudulent . How many first time buyers were lead down the path to financial ruin with that advice . For real estate sales agents to promise dumb borrowers that they could refinance ,was promising that there would be money available from lenders , that real estate would appreciate , and that rates would be more favorable . To even suggest that a sub-prime borrower could qualify for a fixed rate (down the road),is a huge lie .The industry that sold toxic loans were committing that dumb borrower to a lifetime of refinances into new teaser rates and a dependence on real estate always going up .We all know what happened when real estate didn't go up and went down and those dumb borrowers couldn't
get a refinance .
For the real estate agents and mortgage agents to tell people that submitted liar loans that they could get a good loan (down the road ) is telling a person that if they commit fraud now ,they can make it right later.
For the real estate community to suggest that taking equity out of your home all the time to enhance your life style ,without regards to qualifying and that real estate doesn't always go up ,is another myth that was sold to the public.
This was a evil evil bubble in which the sheep were lead to the slaughter . Borrowers were greedy and willing to commit loan fraud to get in on the speculation action that was being peddled by the industry .
The lenders breached their duty to qualify borrowers and prevent fraud and real estate agents did the same .
Just because the police aren't around when crimes are being committed ,doesn't mean that those crimes are acceptable .
The borrowers signed the contract with the lender ,so right now the problem lies with a contract that had a fraudulent base.But under no circumstances can one say that the set up artists (real estate sales agents ) didn't play their part for money . Money ,they did it for money while the getting was good ,builders sold out tracts to investors ,while the getting was good also . Very bad ,very bad ,very bad ,in spite of the fact that the lenders are suppose to be the final watch-dogs in the system.
You can't leave out Wall Street money providers who provided the money to borrowers based on faulty models and ratings because they wanted to make money on a silly mania .What about how they didn't prevent fraud either .
A lot of blame to go around ,including the borrowers fear and greed during the mania ,but they were brain-washed into the belief that loan fraud was OK by the industry .
Get real
Real Estate Sales people presented themselves as investment and loan consultants during the bubble (professionals ),and now you want to say that those sales agents only played the part of the "salesman ". Real estate salespeople were only qualified to show people property ,but they exceeded that roll by giving investment advice ,they became cheerleaders for faulty investment advice and toxic loan pushers . The sales people were the set up artist for loan fraud ,and many got kick-backs for cramming people into bad loans .
The loan world and the real estate agents are not suppose to be partners in crime ,in fact the lenders are suppose to be the watch dog for crimes from the real estate people that their own industry didn't spot .
Appraisers are not suppose to be blackmailed by real estate agents and loan agents ,(that if they don't hit the mark on the appraisal they won't get any more business) .The appraiser ,the loan agent ,and the real estate agents are not suppose to be in cahoots with each other .
The real estate agent does not play a small part in a real estate transaction .In fact, real estate agents write up the sales contract .Is it any wonder that buyers didn't get good contract protection during the mania by real estate sales people and they were crammed into low qualify /low down toxic loans that were easy to be fraudulent with .
Oh, and don't forget the real estate seminars that were being peddled during the boom in which people were encouraged to pull every conceivable trick to get on the property ladder and learn how to flip that house .
The toxic ,low down ,liar loan ,was peddled by the real estate sales people because otherwise they could not make more transactions .To bad real estate people cared more for money than putting people into homes they could afford .To bad loan agents cared more for the commission than putting people into loans they could afford .
The sick part about all this POZI SCHEME peddling that was done by the industry is that had they not done it ,people would of just paid lower prices for real estate years ago ,and the madness would of stopped .Just think how nice it would of been to not have all these foreclosures and National financial bail-out emergencies.
Yet most of the morons are still blaming the loans for causing the foreclosures instead of blaming the high home prices that forced the FB's into risky loans. For the average household, a $150,000 is affordable on a 30yr fixed, but a $600,000 isn't.
selling a someone with a 20k salary a $500K house.
and
selling someone with a 20k salary a $5000 TV.
are not at all equivalent.
sorry...try again.
realtors DO share part of the blame.
michael said...
selling a someone with a 20k salary a $500K house.
and
selling someone with a 20k salary a $5000 TV.
are not at all equivalent.
sorry...try again.
realtors DO share part of the blame.
March 16, 2008 7:00 PM
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What a cogent argument you make.
This blog is hillarious. One thread it's nothing but greedy FB this and greedy FB that, they deserve what they get. Then the next it's all the realtor's fault and the FB is just a poor victim.
Make up your mind huh?
Sales is sales is sales! The best salespeople I have ever met, the ones their companies love, (remember, if they don't sell, they don't eat) would bargain away their own mothers, spouses, and children TO THE DEVIL, to get the suckers name on the bottom line!
It's not just real estate; it's every business that sells a "product." Salespeople are always needed, the necessary evil as it were.
I could never imagine a worse professional category, regardless of what they sell.
I can’t think of one salesman that I have ever met, that the world would not be better off without.
> Finally the truth comes out of someones mouth.God bless san diego.
Right, only that the truth has come from Rich Toscano since 2004. His blog piggington.com was the first to point out the insane bubble.
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