If you want to test someone’s political orientation, ask what caused the housing bubble and subsequent crash (yes, we know, there is no housing crash in the Real Bay Area).
Conservatives blame the federal government (although I repeat myself). In this case it’s a confluence of the GSEs, Freddie Mac and Fannie Mae, and both Congress and the Executive for pushing homeownership on people who weren’t ready for the responsibility and couldn’t afford it anyway. In particular, the guilty parties are Barney Frank and poor people.
Liberals blame Wall Street for blowing up the economy by securitizing mortgages and creating more and more leveraged and abstract financial instruments using them. The products required a steady stream of mortgages, so brokers had every incentive to approve everything. There was no risk to them because they weren’t keeping the loans. Also, since Goldman Sachs ultimately shorted the entire market, they’re doubly responsible for talking it up to customers while doing their best to crater it.
A new Federal report points the finger elsewhere. They blame a different kind of speculator.
Posted: 12/13/2011 06:33:47 AM PST, Updated: 12/13/2011 10:31:40 AM PST
LAS VEGAS — A new federal report shows that speculative real estate investors played a larger role than originally thought in driving the housing bubble that led to record foreclosures and sent economies plummeting in Nevada, California, Arizona, Florida and other states.
Researchers with the Federal Reserve Bank of New York found that investors who used low down payment, subprime credit to purchase multiple residential properties helped inflate home prices and are largely to blame for the recession. The researchers said their findings focused on an "undocumented" dimension of the housing market crisis that had been previously overlooked as officials focused on how to contain the financial crisis, not what caused it.
More than a third of all U.S. home mortgages granted in 2006 went to people who already owned at least one house, according to the report. In Arizona, California, Florida and Nevada, where average home prices more than doubled from 2000 to 2006, investors made up nearly half of all mortgage-backed purchases during the housing bubble. Buyers owning three or more properties represented the fastest-growing segment of homeowners during that time.
"This may have allowed the bubble to inflate further, which caused millions of owner-occupants to pay more if they wanted to buy a home for their family," the researchers noted.
This report won’t satisfy either of the above groups, because it fails to place the blame where it belongs: on either Big Government, Big Business, or Big Poverty. How could a bunch of onesie twosie speculators drive up home prices as much as they did? That’s like blaming high coffee prices on just Seattle residents.
Please identify and complain about your favorite party to blame for the rest of the country’s housing market imploding while our home prices remain
insanely delightfully high robust.
This is an Open Thread.