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Causes of the 2000s United States housing bubble

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Inflation-adjusted housing prices in Japan (1980–2005) compared to home price appreciation the United States, Britain, and Australia (1995–2005).

Approximate cost to own mortgaged property vs. renting.
An approximate formula for the monthly cost of owning a home is obtained by computing the monthly mortgage, property tax, and maintenance costs, accounting for the U.S. tax deduction available for mortgage interest payments and property taxes. This formula does not include the cost of foregoing the standard deduction (required for taking the tax deduction). Assuming a home cost of P dollars, yearly interest rate r fixed over N years, marginal income tax rate , property tax rate (assumed to be ½–2% of P), and yearly maintenance cost rate (assumed to be ½–1% of P), the monthly cost of home ownership is approximately[1]

For example, the monthly cost of a $250,000 home at 6% interest fixed over 30 years, with 1% property taxes, 0.75% maintenance costs, and a 30% federal income tax rate is approximately $1361 per month. The rental cost for an equivalent home may be less in many U.S. cities as of 2006. Adding a down payment or home equity to this calculation can significantly reduce the monthly cost of ownership, while significantly reducing the income stream that the downpayment would generate in a long term CD. Including the monthly cost of forgoing the standard deduction ($10000 for a married couple), the added cost (the reduction in tax savings) of (deduction * tax_rate / 12) would increase the cost to buy a home by $250/mo, to $1611 for a married couple filing jointly in the example above.

Equivalent price-to-earnings (P/E) ratio for homes.
To compute the P/E ratio for the case of a rented house, divide the price of the house by its potential yearly earnings or net income, which is the market rent of the house minus expenses, which include property taxes, maintenance and fees. This formula is:

For the example of the $250,000 home considered above, the P/E ratio would be 24 if this home rents for $1250 per month. Fortune magazine cites a historic range of 11 or 12 for the simpler price-to-rent ratio.[2]

This article reviews the causes of the United States housing bubble.

Mania for home ownership

Americans' love of their homes is widely known and acknowledged;[3] however, many believe that enthusiasm for home ownership is currently high even by American standards, calling the real estate market "frothy",[4] "speculative madness",[5] and a "mania".[6] Many observers have commented on this phenomenon[7][8][9]—as evidenced by the cover of the June 13, 2005 issue of Time Magazine[3] (seen above, itself taken as a sign of the bubble's peak[10])—but as a 2007 article in Forbes warns, "to realize that America's mania for home-buying is out of all proportion to sober reality, one needs to look no further than the current subprime lending mess... As interest rates—and mortgage payments—have started to climb, many of these new owners are having difficulty making ends meet... Those borrowers are much worse off than before they bought."[11] The boom in housing has also created a boom in the real estate profession; for example, California has a record half-million real estate licencees—one for every 52 adults living in the state, up 57% in the last five years.[12]

The overall U.S. homeownership rate increased from 64 percent in 1994 (about where it was since 1980) to a peak in 2004 with an all time high of 69.2 percent.[13] Bush's 2004 campaign slogan "the ownership society" indicates the strong preference and societal influence of Americans to own the homes they live in, as opposed to renting. However, in many parts of the United States, rent does not cover mortgage costs; the national median mortgage payment is $1,687 per month, nearly twice the median rent payment of $868 per month, although this ratio can vary significantly from market to market.[14]

Suspicious Activity Reports pertaining to Mortgage fraud increased by 1,411 percent between 1997 and 2005. Both borrowers seeking to obtain homes they could not otherwise afford, and industry insiders seeking monetary gain, were implicated.[15]

Belief that housing is a good investment

Among Americans, home ownership is widely accepted as preferable to renting in many cases, especially when the ownership term is expected to be at least five years. This is partly due to the fact that the fraction of a fixed-rate mortgage used to pay down the principal builds equity for the homeowner over time, while the interest portion of the loan payments qualifies for a tax break, whereas, except for the personal tax deduction often available to renters but not to homeowners, money spent on rent does neither. However, when considered as an investment, that is, an asset that is expected to grow in value over time, as opposed to the utility of shelter that home ownership provides, housing is not a risk-free investment. The popular notion that, unlike stocks, homes do not fall in value is believed to have contributed to the mania for purchasing homes. Stock prices are reported in real time, which means investors witness the volatility. However, homes are usually valued yearly or less often, thereby smoothing out perceptions of volatility. This assertion that property prices rise has been true for the United States as a whole since the Great Depression,[16] and appears to be encouraged by the real estate industry.[17][18] However, housing prices can move both up and down in local markets, as evidenced by the relatively recent price history in locations such as New York, Los Angeles, Boston, Japan, Vancouver, Seoul, Sydney, and Hong Kong; large trends of up and down price fluctuations can be seen in many U.S. cities (see graph). Since 2005, the year-over-year median sale prices (inflation-adjusted) of single family homes in Massachusetts fell over 10% in 2006.[19] Economist David Lereah formerly of the NAR said in August 2006 that "he expects home prices to come down 5% nationally, more in some markets, less in others."[20] Commenting in August 2005 on the perceived low risk of housing as an investment vehicle, Alan Greenspan said, "history has not dealt kindly with the aftermath of protracted periods of low risk premiums."[21]

Compounding the popular expectation that home prices do not fall, it is also widely believed that home values will yield average or better-than-average returns as investments. The investment motive for purchasing homes should not be conflated with the necessity of shelter that housing provides; an economic comparison of the relative costs of owning versus renting the equivalent utility of shelter can be made separately (see boxed text). Over the holding periods of decades, inflation-adjusted house prices have increased less than 1% per year.[22][23] Robert Shiller shows[22] that over long periods, inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004, and 0.7% per year from 1940–2004. Piet Eichholtz also showed [24] comparable results for housing prices on a single street in Amsterdam (the site of the fabled tulip mania, and where the housing supply is notably limited) over a 350 year period. Such meager returns are dwarfed by investments in the stock and bond markets; although, these investments are not heavily leveraged by fair interest loans. If historic trends hold, it is reasonable to expect home prices to only slightly beat inflation over the long term. Furthermore, one way to assess the quality of any investment is to compute its price-to-earnings (P/E) ratio, which for houses can be defined as the price of the house divided by the potential annual rental income, minus expenses including property taxes, maintenance, insurance, and condominium fees. For many locations, this computation yields a P/E ratio of about 30–40, which is considered by economists to be high for both the housing and the stock markets;[22] historical price-to-rent ratios are 11–12.[2] For comparison, just before the dot-com crash the P/E ratio of the S&P 500 was 45, while in 2005–2007 around 17.[25] In a 2007 article comparing the cost and risks of renting to buying using a buy vs. rent calculator, the New York Times concluded,

"Homeownership, [realtors] argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time. ... [I]t's now clear that people who chose renting over buying in the last two years made the right move. In much of the country ... recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It's almost as if they have thrown money away, an insult once reserved for renters."[26]

A 2007 Forbes article titled "Don't Buy That House" invokes similar arguments and concludes that for now, "resist the pressure [to buy]. There may be no place like home, but there's no reason you can't rent it."[11]

Promotion in the media

In late 2005 and into 2006, there were an abundance of television programs promoting real estate investment and flipping.[27][28] In addition to the numerous television shows, book stores in cities throughout the United States could be seen showing large displays of books touting real-estate investment, such as NAR chief economist David Lereah's book Are You Missing the Real Estate Boom?, subtitled Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade - And How to Profit From Them, published in February 2005.[29] One year later, Lereah retitled his book Why the Real Estate Boom Will Not Bust - And How You Can Profit from It.[30]

However, following Federal Reserve chairman Ben Bernanke's comments on the "downturn of the housing market" in August 2006,[31] Lereah said in an NBC interview that "we've had a boom marketplace: you've got to correct because booms cannot sustain itself forever [sic]."[32] Commenting on the phenomenon of shifting NAR accounts of the national housing market (see David Lereah's comments[32][33][34]), the Motley Fool reported, "There's nothing funnier or more satisfying ... than watching the National Association of Realtors (NAR) change its tune these days. ... the NAR is full of it and will spin the numbers any way it can to keep up the pleasant fiction that all is well."[18]

Upon leaving the NAR in May 2007, Lereah explained to Robert Siegel of National Public Radio that using the word "boom" in the title was actually his publisher's idea, and "a poor choice of titles".[35]

Speculative fever

Total US derivatives and total US wealth 1995–2007 compared to total world wealth in the year 2000

The graph above shows the total notional value of derivatives relative to US Wealth measures. It is important to note for the casual observer that, in many cases, notional values of derivatives carry little meaning. Often the parties cannot easily agree on terms to close a derivative contract. The common solution has been to create an equal and opposite contract, often with a different party, in order to net payments (Derivatives_market#Netting), thus eliminating all but the counterparty risk of the contract, but doubling the nominal value of outstanding contracts.

As median home prices began to rise dramatically in 2000–2001 following the fall in interest rates, speculative purchases of homes also increased.[36] Fortune magazine's article on housing speculation in 2005 said, "America was awash in a stark, raving frenzy that looked every bit as crazy as dot-com stocks."[37] In a 2006 interview in BusinessWeek magazine, Yale economist Robert Shiller said of the impact of speculators on long term valuations, "I worry about a big fall because prices today are being supported by a speculative fever,"[38] and former NAR chief economist David Lereah said in 2005 that "[t]here's a speculative element in home buying now."[33][broken footnote] Speculation in some local markets has been greater than others, and any correction in valuations is expected to be strongly related to the percentage amount of speculative purchases.[34][39][40] In the same BusinessWeek interview, Angelo Mozilo, CEO of mortgage lender Countrywide Financial, said in March 2006, "in areas where you have had heavy speculation, you could have 30% [home price declines]... A year or a year and half from now, you will have seen a slow deterioration of home values and a substantial deterioration in those areas where there has been speculative excess."[38] The chief economist for the National Association of Home Builders, David Seiders, said that California, Las Vegas, Florida and the Washington, D.C., area "have the largest potential for a price slowdown" because the rising prices in those markets were fed by speculators who bought homes intending to "flip" or sell them for a quick profit.[41] Dallas Fed president Richard Fisher said in 2006 that the Fed held its target rate at 1 percent "longer than it should have been" and unintentionally prompted speculation in the housing market.[42][43]

Various real estate investment advisors openly advocated the use of no money down property flipping, which led to the demise of many speculators who followed this strategy such as Casey Serin.[44][45]

Buying and selling above normal multiples

Home prices, as a multiple of annual rent, have been 15 since World War II. In the bubble, prices reached a multiple of 26. In 2008, prices had fallen to a multiple of 22.[46]

Crash of the dot-com bubble

Several economists have argued that the stock market crash, especially in the dot-com and technology sectors, in 2000 and the subsequent 70% (or so) drop of the NASDAQ composite index resulted in many people taking their money out of the stock market and purchasing real estate, which many believed to be a more reliable investment.[23][47][48] Yale economist Robert Shiller argued further that "irrational exuberance" was displaced from the fallen stock market to housing: "Once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed."[49]

Historically low interest rates

Common indexes used for Adjustable Rate Mortgages (1996-2006)

Another important consequence of the dot-com crash and the subsequent 2001–2002 recession was that the Federal Reserve cut short-term interest rates to historically low levels, from about 6.5% to just 1%. Former Federal Reserve Board Chairman Alan Greenspan admitted that the housing bubble was "fundamentally engendered by the decline in real long-term interest rates."[50] In the United States, mortgage rates are typically set in relation to 10-year treasury bond yields, which, in turn, are affected by Federal Funds rates. The Federal Reserve acknowledges the connection between lower interest rates, higher home values, and the increased liquidity the higher home values bring to the overall economy.[51] A Federal Reserve report reads,

Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission.[52]

For this reason some have criticized then Fed Chairman Alan Greenspan for "engineering" the housing bubble,[53][54][55][56][57][58] saying, e.g., "It was the Federal Reserve-engineered decline in rates that inflated the housing bubble."[47] Between 2000 and 2003, the interest rate on 30-year fixed-rate mortgages fell 2.5 percentage points (from 8% to all-time historical low of about 5.5%). The interest rate on one-year adjustable rate mortgages (1/1 ARMs) fell 3 percentage points (from about 7% to about 4%). Richard Fisher, president of the Dallas Fed, said in 2006 that the Fed's low interest-rate policies unintentionally prompted speculation in the housing market, and that the subsequent "substantial correction [is] inflicting real costs to millions of homeowners."[42][43]

A drop in mortgage interest rates reduces the cost of borrowing and should logically result in an increase in prices in a market where most people borrow money to purchase a home (for instance, in the United States), so that average payments remain constant. If one assumes that the housing market is efficient, the expected change in housing prices (relative to interest rates) can be computed mathematically. The calculation in the sidebox shows that a 1 percentage point change in interest rates would theoretically affect home prices by about 10% (given 2005 rates on fixed-rate mortgages). This represents a 10-to-1 multiplier between percentage point changes in interest rates and percentage change in home prices. For interest-only mortgages (at 2005 rates), this yields about a 16% change in principal for a 1% change in interest rates at current rates. Therefore, the 2% drop in long-term interest rates can account for about a 10 × 2% = 20% rise in home prices if every buyer is using a fixed-rate mortgage (FRM), or about 16 × 3% ≈ 50% if every buyer is using an adjustable rate mortgage (ARM) whose interest rates dropped 3%. Robert Shiller shows that the inflation adjusted U.S. home price increase has been about 45% during this period,[22] an increase in valuations that is approximately consistent with most buyers financing their purchases using ARMs. In areas of the United States believed to have a housing bubble, price increases have far exceeded the 50% that might be explained by the cost of borrowing using ARMs. For example, in San Diego area, average mortgage payments grew 50% between 2001 and 2004. When interest rates rise, a reasonable question is how much house prices will fall, and what effect this will have on those holding negative equity, as well as on the U.S. economy in general. The salient question is whether interest rates are a determining factor in specific markets where there is high sensitivity to housing affordability.

Between 2004 and 2006, the Fed raised interest rates 17 times, increasing them from 1% to 5.25%, before pausing.[59] The Fed paused raising interest rates because of the concern that an accelerating downturn in the housing market could undermine the overall economy, just as the crash of the dot-com bubble in 2000 contributed to the subsequent recession. However, New York University economist Nouriel Roubini asserted that "The Fed should have tightened earlier to avoid a festering of the housing bubble early on."[60]

There was a great debate as to whether or not the Fed would lower rates in late 2007. The majority of economists expected the Fed to maintain the Fed funds rate at 5.25 percent through 2008;[61] however, on September 18, it lowered the rate to 4.75 percent.[62]

Differential relationship between interest rates and affordability.
An approximate formula can be obtained that provides the relationship between changes in interest rates and changes in home affordability. The computation proceeds by designating affordability (the monthly mortgage payment) constant, and differentiating the equation for monthly payments

with respect to the interest rate r, then solving for the change in Principal. Using the approximation (K → ∞, and e = 2.718... is the base of the natural logarithm) for continuously compounded interest, this results in the approximate equation

(fixed-rate loans). For interest-only mortgages, the change in principal yielding the same monthly payment is

(interest-only loans). This calculation shows that a 1 percentage point change in interest rates would theoretically affect home prices by about 10% (given 2005 rates) on fixed-rate mortgages, and about 16% for interest-only mortgages. Robert Shiller does compare interest rates and overall U.S. home prices over the period 1890–2004 and concludes that interest rates do not explain historic trends for the country.[22]

Risky mortgage products and lax lending standards

The recent use of subprime mortgages, adjustable rate mortgages, interest-only mortgages, and stated income loans (a subset of "Alt-A" loans, where the borrower did not have to provide documentation to substantiate the income stated on the application; these loans were also called "no doc" (no documentation) loans and, somewhat pejoratively, as "liar loans") to finance home purchases described above have raised concerns about the quality of these loans should interest rates rise again or the borrower is unable to pay the mortgage.[22][63][64][65] In many areas, particularly in those with most appreciation, non-standard loans went from almost unheard of to prevalent. For example, 80% of all mortgages initiated in San Diego region in 2004 were adjustable-rate, and 47% were interest only.

In 1995, Fannie Mae and Freddie Mac began receiving affordable housing credit for buying subprime securities [66]

Some borrowers got around downpayment requirements by using seller-funded downpayment assistance programs (DPA), in which a seller gives money to a charitable organizations that then give the money to them. From 2000 through 2006, more than 650,000 buyers got their down payments through nonprofits.[67] According to a Government Accountability Office study, there are higher default and foreclosure rates for these mortgages. The study also showed that sellers inflated home prices to recoup their contributions to the nonprofits.[68] On May 4, 2006 the IRS ruled that such plans are no longer eligible for non-profit status due to the circular nature of the cash flow, in which the seller pays the charity a "fee" after closing.[69] On October 31, 2007 the Department of Housing and Urban Development adopted new regulations banning so-called "seller-funded" downpayment programs. Most must cease providing grants on FHA loans immediately; one can operate until March 31, 2008.[67]

Some believe that mortgage standards became lax because of a moral hazard, where each link in the mortgage chain collected profits while believing it was passing on risk.[70] Mortgage denial rates for conventional home purchase loans, reported under the Home Mortgage Disclosure Act, have dropped noticeably, from 29 percent in 1998, to 14 percent in 2002 and 2003.[71]

In March 2007, the United States' subprime mortgage industry collapsed due to higher-than-expected home foreclosure rates, with more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.[72] Harper's Magazine warned of the danger of rising interest rates for recent homebuyers holding such mortgages, as well as the U.S. economy as a whole: "The problem [is] that prices are falling even as the buyers' total mortgage remains the same or even increases. ... Rising debt-service payments will further divert income from new consumer spending. Taken together, these factors will further shrink the “real” economy, drive down those already declining real wages, and push our debt-ridden economy into Japan-style stagnation or worse."[73] Factors that could contribute to rising rates are the U.S. national debt, inflationary pressure caused by such factors as increased fuel and housing costs, and changes in foreign investments in the U.S. economy. The Fed raised rates 17 times, increasing them from 1% to 5.25%, between 2004 and 2006.[59] BusinessWeek magazine called the option ARM "the riskiest and most complicated home loan product ever created" and warned that over one million borrowers took out $466 billion in option ARMs in 2004 through the second quarter of 2006, citing concerns that these financial products could hurt individual borrowers the most and "worsen the [housing] bust."[74] To address the problems arising from "liar loans", the Internal Revenue Service updated an income verification tool used by lenders to make confirmation of borrower's claimed income to be faster and easier.[64] In April 2007, financial problems similar to the subprime mortgages began to appear with Alt-A loans made to homeowners who were thought to be less risky; the delinquency rate for Alt-A mortgages rose in 2007.[75] The manager of the world's largest bond fund PIMCO, warned in June 2007 that the subprime mortgage crisis was not an isolated event and will eventually take a toll on the economy and whose ultimate impact will be on the impaired prices of homes.[76]

References

  1. ^ A derivation for the monthly cost is provided at usenet's sci.math FAQ.
  2. ^ a b Tully, Shawn (2003-12-22). "The New Home Economics". Fortune.
  3. ^ a b "Home $weet Home". Time. 2005-06-13.
  4. ^ Greenspan, Alan (2005-05-20). "Greenspan Calls Home-Price Speculation Unsustainable". Bloomberg. At a minimum, there's a little froth [in the U.S. housing market]... It's hard not to see that there are a lot of local bubbles.
  5. ^ "No mercy now, no bail-out later". The Daily Telegraph. 2006-03-23. [T]he American housing boom is now the mother of all bubbles—in sheer volume, if not in degrees of speculative madness. {{cite news}}: line feed character in |quote= at position 94 (help)
  6. ^ "Episode 06292007". Bill Moyers Journal. 2007-06-29. PBS. {{cite episode}}: External link in |transcripturl= (help); Unknown parameter |transcripturl= ignored (|transcript-url= suggested) (help)
  7. ^ Zweig, Jason (2005-05-02). "The Oracle Speaks". CNNMoney.com. [Warren Buffet:] Certainly at the high end of the real estate market in some areas, you've seen extraordinary movement... People go crazy in economics periodically, in all kinds of ways... when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences.
  8. ^ "Soros predicts American recession". The Times. 2006-01-09. Retrieved 2008-03-17. Mr Soros said he believed the US housing bubble, a major factor behind strong American consumption, had reached its peak and was in the process of being deflated.
  9. ^ Kiyosaki, Robert (2005?). "All Booms Bust". Robert Kiyosaki. Archived from the original on 2006-04-23. Lately, I have been asked if we are in a real estate bubble. My answer is, 'Duh!' In my opinion, this is the biggest real estate bubble I have ever lived through. Next, I am asked, 'Will the bubble burst?' Again, my answer is, 'Duh! {{cite news}}: Check date values in: |date= (help)
  10. ^ "The Pin that Bursts the Housing Bubble". Forbes. 2005-07-21. Retrieved 2008-03-17.
  11. ^ a b "Don't Buy That House". Forbes. 2007-06-26.
  12. ^ "New recorad: Nearly a half-million real estate licenses". Sacramento Business Journal. 2006-05-23. To accommodate the demand for real estate licenses, the DRE conducted numerous 'mega-exams' in which thousands of applicants took the real estate license examination... 'The level of interest in real estate licensure is unprecedented' {{cite news}}: line feed character in |quote= at position 154 (help)
  13. ^ "Census Bureau Reports on Residential Vacancies and Homeownership" (PDF). U.S. Census Bureau. 2007-10-26.
  14. ^ "For some, renting makes more sense". USA Today. 2006-08-10.
  15. ^ Reported Suspicious Activities
  16. ^ "Housing Bubble—or Bunk? Are home prices soaring unsustainably and due for plunge? A group of experts takes a look—and come to very different conclusions". Business Week. 2005-06-22.
  17. ^ Roubini, Nouriel (2006-08-26). "Eight Market Spins About Housing by Perma-Bull Spin-Doctors... And the Reality of the Coming Ugliest Housing Bust Ever..." RGE Monitor. A lot of spin is being furiously spinned around–often from folks close to real estate interests–to minimize the importance of this housing bust, it is worth to point out a number of flawed arguments and misperception that are being peddled around. You will hear many of these arguments over and over again in the financial pages of the media, in sell-side research reports and in innumerous TV programs. So, be prepared to understand this misinformation, myths and spins. {{cite news}}: line feed character in |quote= at position 86 (help)
  18. ^ a b "I want my bubble back". Motley Fool. 2006-06-09.
  19. ^ Plot of Massachusetts Single Family Home Inflation Adjusted Median Prices, 2004–2006.
    Massachusetts Single Family Home Year-Over-Year Inflation Adjusted Price Changes, 2004–2006, from publicly available U.S. government and Massachusetts Association of Realtors data. Note that: (1) the inflation-adjusted year-over-year price is decreasing; (2) the rate of price decrease is accelerating; (3) the overall shape of this curve is consistent with a market that peaked in summer 2005, with a critical point at mid-August, and is falling. (Source: bostonbubble.com.)
  20. ^ Lereah, David (2005-08-24). "Existing home sales drop 4.1% in July, median prices drop in most regions". USA Today.
  21. ^ Greenspan, Alan (2005-08-26). "Remarks by Chairman Alan Greenspan: Reflections on central banking, At a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming". Federal Reserve Board.
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  23. ^ a b Shiller, Robert (2005-06-20). "The Bubble's New Home". Barron's. The home-price bubble feels like the stock-market mania in the fall of 1999, just before the stock bubble burst in early 2000, with all the hype, herd investing and absolute confidence in the inevitability of continuing price appreciation. My blood ran slightly cold at a cocktail party the other night when a recent Yale Medical School graduate told me that she was buying a condo to live in Boston during her year-long internship, so that she could flip it for a profit next year. Tulipmania reigns. {{cite news}}: line feed character in |quote= at position 226 (help) Plot of inflation-adjusted home price appreciation in several U.S. cities, 1990–2005:
    Plot of inflation-adjusted home price appreciation in several U.S. cities, 1990–2005.
  24. ^ A long run price index - the herengracht index
  25. ^ "S&P 500 Index Level Fundamentals".
  26. ^ "A Word of Advice During a Housing Slump: Rent". The New York Times. 2007-04-11.
  27. ^ "TV's Hot Properties: Real Estate Reality Shows". The Washington Post. 2005-12-28.
  28. ^ Reality TV programs about flipping include:
  29. ^ Lereah, David (2005). Are You Missing the Real Estate Boom?. Currency/Doubleday. ISBN 0385514344.
  30. ^ Lereah, David (2005). Why the Real Estate Boom Will Not Bust - And How You Can Profit from It. Currency/Doubleday. ISBN 0385514352.
  31. ^ "For Whom the Housing Bell Tolls". Barron's. 2006-08-10.
  32. ^ a b Michael Okwu. "Bubble Bursting". The Today Show. NBC. The video of the report is available at an entry of 2006-08-19 on the blog Housing Panic.
  33. ^ a b Lereah, David (2005-05-25). "Average price of home tops $200,000 amid sales frenzy". Reuters. There's a speculative element in home buying now.
  34. ^ a b "Public remarks from NAR chief economist David Lereah". 2006-04-27.
  35. ^ "A Real Estate Bull Has a Change of Heart". All Things Considered. National Public Radio. 2007-05-10.
  36. ^ "Steep Rise in Prices for Homes Adds to Worry About a Bubble". The New York Times. 2005-05-25. 'There's clearly speculative excess going on', said Joshua Shapiro, the chief United States economist at MFR Inc., an economic research group in New York. 'A lot of people view real estate as a can't lose.'
  37. ^ "Lowering the Boom? Speculators Gone Mild". Fortune. 2006-03-15. America was awash in a stark, raving frenzy that looked every bit as crazy as dot-com stocks. {{cite news}}: line feed character in |quote= at position 30 (help)
  38. ^ a b Bartiromo, Maria (2006-03-06). "Jitters On The Home Front". Business Week. Retrieved 2008-03-17.
  39. ^ June Fletcher (2006-03-17). "Is There Still Profit to Be Made From Buying Fixer-Upper Homes?". The Wall Street Journal. {{cite news}}: line feed character in |title= at position 28 (help)
  40. ^ Laperriere, Andrew (2006-04-10). "Housing Bubble Trouble: Have we been living beyond our means?". The Weekly Standard.
  41. ^ Seiders, David (2006-03-06). "Housing cooling off: Could chill economy". San Diego Union Tribune.
  42. ^ a b "Official Says Bad Data Fueled Rate Cuts, Housing Speculation". The Wall Street Journal. 2006-11-06. In retrospect, the real Fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer than it should have been... In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets... Toda... the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the [Fed's] task of achieving... sustainable noninflationary growth. {{cite news}}: line feed character in |quote= at position 335 (help)
  43. ^ a b "Fed's Bies, Fisher See Inflation Rate Beginning to Come Down". Bloomberg. 2006-11-03.
  44. ^ Knox, Noelle (2006-10-22). "10 mistakes that made flipping a flop". USA Today. Retrieved 2008-03-17.
  45. ^ Patterson, Randall (2007-03-18). "Russ Whitney Wants You to Be Rich". The New York Times. Retrieved 2008-03-17.
  46. ^ Zuckerman, Mortimer B. (November 17–24, 2008). Editorial:Obama's Problem No. 1. US News and World Report.{{cite book}}: CS1 maint: date format (link)
  47. ^ a b "Is A Housing Bubble About To Burst?". BusinessWeek. 2004-07-19. Retrieved 2008-03-17.
  48. ^ Baker, Dean (July 2005). "The Housing Bubble Fact Sheet" (PDF). Center for Economic and Policy Research. The generalized bubble in housing prices is comparable to the bubble in stock prices in the late 1990s. The eventual collapse of the housing bubble will have an even larger impact than the collapse of the stock bubble, since housing wealth is far more evenly distributed than stock wealth. {{cite news}}: line feed character in |quote= at position 189 (help)
  49. ^ Shiller, Robert (2005-06-20). "The Bubble's New Home". Barron's. Once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed. Where else could plungers apply their newly acquired trading talents? The materialistic display of the big house also has become a salve to bruised egos of disappointed stock investors. These days, the only thing that comes close to real estate as a national obsession is poker.
  50. ^ Greenspan, Alan (2007-09-16). "A global outlook". Financial Times.
  51. ^ Greenspan, Alan (2005-12-06). "Housing Bubble Bursts in the Market for U.S. Mortgage Bonds". Bloomberg. Froth in housing markets may be spilling over into mortgage markets. {{cite news}}: line feed character in |title= at position 8 (help)
  52. ^ "International Finance Discussion Papers, Number 841, House Prices and Monetary Policy: A Cross-Country Study" (PDF). Federal Reserve Board. September 2005. Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission.
  53. ^ Roach, Stephen (2004-02-26). "The American economy: A phoney recovery, Drug addicts get only a temporary high. America's economy, addicted to asset appreciation and debt, is no different". The Economist. The Fed, in effect, has become a serial bubble blower.
  54. ^ Wallace-Wells, Benjamin (April 2004). "There Goes the Neighborhood: Why home prices are about to plummet—and take the recovery with them". Washington Monthly.
  55. ^ Roach, Stephen (2005). "Morgan Stanley Global Economic Forum: Original Sin". Morgan Stanley. See also James Wolcott's comments.
  56. ^ Phillips, Kevin (2006). American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century. Viking. ISBN 067003486X.
  57. ^ Krugman, Paul (2006-08-07). "Intimations of a Recession". The New York Times.
  58. ^ Fleckenstein, Bill (2006-08-21). "Face it: The housing bust is here". MSN.
  59. ^ a b "Fed holds rates for first time in two years". Financial Times. 2006-08-08.
  60. ^ Roubini, Nouriel (2006-08-09). "Fed Holds Interest Rates Steady As Slowdown Outweighs Inflation". The Wall Street Journal. The Fed should have tightened earlier to avoid a festering of the housing bubble early on. The Fed is facing a nightmare now: the recession will come and easing will not prevent it. {{cite news}}: line feed character in |quote= at position 20 (help)
  61. ^ "Poll: Fed to leave U.S. rates at 5.25 percent through end-2008". Reuters. 2007-06-14.
  62. ^ "In bold stroke, Fed cuts base rate half point to 4.75 percent". AFP. 2007-09-17.
  63. ^ "Adjustable-rate loans come home to roost: Some squeezed as interest rises, home values sag". The Boston Globe. 2006-01-11.
  64. ^ a b "Lenders Will Be Spotting Income Fibs Much Faster". Hartford Courant. 2006-10-01. {{cite news}}: line feed character in |title= at position 25 (help)
  65. ^ "24 Years Old, $2 Million in the Hole". Motley Fool. 2006-09-25.
  66. ^ Leonnig, Carol D. (June 10, 2008). "How HUD Mortgage Policy Fed The Crisis". Washington Post.
  67. ^ a b Lewis, Holden. "Feds cut down-payment assistance programs". Bankrate.com. Retrieved 2008-03-17.
  68. ^ "Mortgage Financing: Additional Action Needed to Manage Risks of FHA-Insured Loans with Down Payment Assistance" (PDF). Government Accountability Office. November 2006. Retrieved 2008-03-17.
  69. ^ "IRS Targets Down-Payment-Assistance Scams; Seller-Funded Programs Do Not Qualify As Tax Exempt". Internal Revenue Service. 2006-05-04. Retrieved 2008-03-17.
  70. ^ Lewis, Holden (2007-04-18). "'Moral hazard' helps shape mortgage mess". Bankrate.com.
  71. ^ "(untitled)" (Press release). Federal Financial Institutions Examination Council. 2004-07-26. Retrieved 2008-03-18.
  72. ^ "The Mortgage Mess Spreads". BusinessWeek. 2007-03-07.
  73. ^ Hudson, Michael (May 2006). "The New Road to Serfdom". Harper's. Vol. 312, no. 1872. pp. 39–46.
  74. ^ Der Hovanesian, Mara (2006-09-01). "Nightmare Mortgages". BusinessWeek.
  75. ^ "Defaults Rise in Next Level of Mortgages". The New York Times. 2007-04-10.
  76. ^ "PIMCO's Gross". CNNMoney.com. 2007-06-27.

See also

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