If these are the guys in charge, we're in big trouble.
See, I thought the following was a given. Acknowledged by all. Understood.
But, then again, I watched the Bubble from Ground Zero -- Bend, ever-lovin Oregon.
"Flip This House”: Investor Speculation and the Housing Bubble
Andrew Haughwout, Donghoon Lee, Joseph Tracy, and Wilbert van der Klaauw
The recent financial crisis—the worst in eighty years—had its origins in the enormous increase and subsequent collapse in housing prices during the 2000s. While the housing bubble has been the subject of intense public debate and research, no single answer has emerged to explain why prices rose so fast and fell so precipitously. In this post, we present new findings from our recent New York Fed study that uses unique data to suggest that real estate “investors”—borrowers who use financial leverage in the form of mortgage credit to purchase multiple residential properties—played a previously unrecognized, but very important, role. These investors likely helped push prices up during 2004-06; but when prices turned down in early 2006, they defaulted in large numbers and thereby contributed importantly to the intensity of the housing cycle’s downward leg.
Really? Who'd have thunk it.
It was a Bubble, big guys. What part of the phenomenon don't you understand?
They act as though, the fact that "prices rose so fast and fell so precipitously" was a big mystery.
And that they are surprised, surprised I tell you!, that investor speculation was a main factor.
"...previously unrecognized?" Good lord.
In my experience, Speculation is the Major cause of any and all Bubbles. And the speculation in the housing market wasn't just investors in multiple houses -- it was buyers making bad deals and buying bigger houses than they could afford, with the idea that the house would increase in price and allow them to afford it later. Speculation, whether acknowledged or understood at the time.
Are the Fed really so clueless?
Or is this some kind of P.R. bullshit?
4 days ago