Who’s to Blame for the Real Estate Bubble?
It was like a high-stakes poker game where everyone at the table was ALL IN and it seemed like everyone was winning. Who was playing? Who’s joining the game now?
Palm Coast, Florida – June 20, 2009 – The housing market collapsed, helping to set up the collapse of the financial markets which followed. Many lives changed forever. Almost no one was untouched; jobs lost, homes foreclosed, bankruptcies, credit ruined, and retirement delayed. Certainly we can blame someone, but who?
The Players:
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Real estate agents and brokers
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Developers
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Builders
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Buyers
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Sellers
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Home Inspection companies
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Appraisers
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Loan originators
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Lenders
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Wall Street investment bankers
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Politicians
It was like a big poker game where everyone was ALL IN. Just as in the dot.com bubble, participants convinced themselves that the old rules no longer applied. Greed can be an antidote for logic. This was a "new economy." Euphoria prevailed. Somehow, it seemed like everyone at the table was winning. Most players simply got caught up in the excitement, making well intended but bad choices. Too many were unethical. A few broke the law.
Real estate and mortgage fraud was responsible for a large portion of the irrational market. It only takes a few transactions driven by a fraudulent appraisal and loan to raise the comparable values for an entire neighborhood. Legislators put too much pressure on lenders to make loans to people who could not pay them back. Exotic loans were invented. The watchers were either asleep or unprepared for the extent to which transaction participants would take advantage of such a loosely regulated market.
Only the tip of the iceberg has shown itself. Fraud investigations are complex. They are paperwork and labor intensive. They take a long time. And fraud was so prevalent it overwhelmed investigators. Most culprits will probably never be caught.
Now that the market can be defined as whatever the opposite of irrational exuberance is, most of the players have left the table licking their wounds. A few leave justly or unjustly enriched. The chairs did not remain empty very long. Politicians, still believing they know what is best, continue to muck up the system. They are joined by lawyers, some correctly trying to win compensation for clients who were defrauded. Others are busy filing lawsuits that are probably unwinnable, meanwhile extracting retainers and ongoing fees from clients left vulnerable by the results of their own bad decisions.
A new group at the table comes bearing the banners of "mortgage rescue" or "foreclosure rescue." A few, mostly non-profits do good, legitimate work, but most are flimflam entities preying on the vulnerable. Not surprising, some are run by the same people who once participated in the real estate and mortgage frauds that helped drive the bubble.
Not all are equally guilty!!
Toby,
When you provide a jumbled list of all those who are culpable it tends to give the impression that all are equally guilty, and that may be true from a moral perspective but when our esteemed congress and senate put pressure on Fannie Mae and Freddie Mac to make loans to folks who have no possibility of ever paying those loans, they create a great deal of pain and suffering to those that should never been offered that false dream but they also created the illusion to everyone else involved that there were no longer any rules and anything went if it pushed their agenda!
While it doesn’t absolve culpability, the chronology of events is the lynchpin of where the major blame lies and it is totally focused in one area and we all know where that is. D.C.
BLAME FOR REAL STATE BUBBLE
I BLAME DC POLITITIANS FANNIE MAE FREDDIE MAC look nowhere else
back at you
Blame the government all you want, they were part of the problem, but if you dig deeper I think you will find greed, dishonesty and risk/leverage is where this mostly lies. Sellers ,buyers and banks.
and it is the banks collapsing that sent our economy into meltdown wiping out wealth and jobs. The poor or sub -prime wasn’t the biggest part of that…but people losing jobs was!!!
and btw we all participated in one way or another….lph
How about the Media?
I believe this all started because the media was losing revenue due to a robust real estate market with no need to advertise, so they started with articles about a bubble. Before long, the articles were in every paper every day and it became a self-fulling prophecy.