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Cain: I didnít realize in 2005 that the housing bubble existed
Hot Air ^ | OCTOBER 12, 2011 | Ed Morrissey

Posted on 10/12/2011 3:02:28 PM PDT by RobinMasters

As Jazz Shaw predicted, the national media has suddenly begun doing a lot of homework on Herman Cain now that he’s riding high in the polls, and the first one to take a crack at the new Not-Romney is NBC’s Chuck Todd.

Todd challenges Cain on a 2005 column he wrote that dismissed concerns of a “bad economy” and a housing bubble, the latter of which at least turned out to be all too true. Cain admits that he didn’t see it coming, which prompts the obvious follow-up question from Todd about just how good his economic instincts actually are. This starts about four and a half minutes in, if you want to cut to the chase:

(Excerpt) Read more at hotair.com ...


TOPICS: Business/Economy; Constitution/Conservatism; News/Current Events; Politics/Elections
KEYWORDS: cain; economy; paultardalert

1 posted on 10/12/2011 3:02:31 PM PDT by RobinMasters
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To: RobinMasters

“Blah blah blah, Chuck Todd ... zzzzzzzzzzzzzzzzzzzzzzzz


2 posted on 10/12/2011 3:04:59 PM PDT by jessduntno (Obama shanks. America tanks.)
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To: RobinMasters

Cain wasn’t an elected official then, or now.

Obama, Frank, Dodd, Schumer, Reid, Pelosi, Waxman, Waters and the rest of the criminals were elected and IN THE KNOW!


3 posted on 10/12/2011 3:05:45 PM PDT by sappy
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To: RobinMasters

And neither did anyone else....

BTW - when is Ron Paul going to stop sucking the life out of the federal coffers and stop with the friggin EAR MARKS???


4 posted on 10/12/2011 3:10:25 PM PDT by Fred (But we are never going to survive unless we get a little crazy)
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To: RobinMasters

So, what did obama tell us about it in 2005?


5 posted on 10/12/2011 3:10:58 PM PDT by Right Wing Assault (Dick Obama is more inexperienced now than he was before he was elected.)
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To: RobinMasters

I saw the housing bubble crashing (all bubbles burst), but I didn’t think it would cripple the entire banking industry.


6 posted on 10/12/2011 3:12:12 PM PDT by Retired Greyhound (.)
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To: RobinMasters

This observation from 2005 doesn’t bother me. Of much more concern is the Greenspan comment.

I believe Cain can go the distance.

If he turns out to be ‘the flavor of the month’, I don’t think that helps Perry. The next ‘flavor’ will be Newt, and I must say that I’d reconsider him if Cain falls, and that’s something I couldn’t have guessed i’d think, even 2 weeks ago.

Either way, Perry is done, and Romney won’t break 25% in the Primary. I can live with that.


7 posted on 10/12/2011 3:14:44 PM PDT by ziravan (You don't have to be a rocket scientist to be President...but it helps.)
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To: RobinMasters

Nein Nien Nien


8 posted on 10/12/2011 3:14:54 PM PDT by linn37
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To: RobinMasters

Did Todd know, he should have let us know.

Pray for America


9 posted on 10/12/2011 3:17:40 PM PDT by bray (The Herman Cain is rising)
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To: sappy

In 2005 VERY few people realized that housing was such a problem. I knew credit expansion was a problem back then, but I never imagined it would turn out this bad, and it isn’t over by a long shot. We haven’t de-levered credit nearly enough private OR public debt.

Heck, I remember back as soon as 2007, a few people here on FR were raising the alarm over what was soon to come regarding the economy, and they were flamed to no end by most. They were called everything from ‘doom and gloomers’ to RINOs. I wonder if those flamers are still around, and realize how much of a horse’s ass they looked like back then. I’d love to find links to posts made back then. It would make for some entertaining reading! lol


10 posted on 10/12/2011 3:18:24 PM PDT by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
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How many of the other candidates recognized the housing bubble in 2005?

I don’t expect a presidential candidate (or president) to know everything. I want a president who surrounds himself with the best and the brightest in their fields (and are people who aren’t afraid to give honest assessments).


11 posted on 10/12/2011 3:33:43 PM PDT by Kipp
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To: Kipp

I did.....

I moved from Michigan to New Mexico in early 2005, and in looking for a house was shocked on what had changed in the 7-8 years since I had last bought. I had also interviewed in Orange County California before taking the job in NM, did research on housing there, and thought there was NO WAY I would take a job out there, the housing market just didn’t make any sense.... New Mexico was bad, but not nearly California insane.....

Part of it I was moving from an area of Michigan were pricing was flat over 1998-2005, where everywhere else it was up 50-100% plus.....


12 posted on 10/12/2011 3:50:04 PM PDT by machman
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To: Kipp

Maybe he can get his bosom buddy Bawney Fwank on his show and ask him when HE knew, since Bawney insisted right up until they collapsed that Fannie Mae and Freddie Mac didn’t need oversight.


13 posted on 10/12/2011 3:58:43 PM PDT by Right Cal Gal (Ronald Reagan: "our liberal friends....know so much that isn't so...")
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To: KoRn

In 2005, even by the end of 2005, it was apparent that housing prices had gone too far up, but the seriously loony loan-writing was just starting. The 2006/2007 vintage of loans was the seriously stupid stuff, coupled with insanely high prices.

I was one of the early people here on FR to start warning of potential home price devaluation (and I was warning of only as much as 15 to 20% - nowhere near as bad as it has become) and then only after March of 2007. The winter of 2006, I started taking notice seriously and working to understand all the inner workings of the mortgage market, in particular answering the question “WTF is a CDO?” It took me seeing the data coming out in late 2006 that there was a whole new class of borrower who defaulted on their mortgage from the very first payment due in 2006 to convince me that the turds were going to hit the turbine blades.

If someone says they didn’t see it in 2005, well, they’re with the vast majority of people. If someone says they didn’t see the banking cluster-(*&&^ coming by September of 2007, then they were dumber than fenceposts. The events of 2007 laid it out for everyone to see that it was going to get bad.


14 posted on 10/12/2011 4:00:29 PM PDT by NVDave
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To: NVDave

In 2005 sold a duplex for 30% profit and built a house in 2006 which has lost 30% in 5 years.

Should have put my funds in a Cayman bank;) LOL!!


15 posted on 10/12/2011 4:07:57 PM PDT by sodpoodle (God is ignoring me - because He is watching you)
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To: RobinMasters

So, who in the hell did? Certainly no one in power who took stringent steps to prevent the resulting disaster.

GW Bush paid lip service to it a couple times, then bragged about how many under his administration had homes, they could not afford to make payments on.


16 posted on 10/12/2011 4:15:12 PM PDT by Sea Parrot (Democrats creation of the entitlement class will prove out to be their very own Frankenstein monster)
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To: RobinMasters

So, who in the hell did? Certainly no one in power who took stringent steps to prevent the resulting disaster.

GW Bush paid lip service to it a couple times, then bragged about how many under his administration had homes, they could not afford to make payments on.


17 posted on 10/12/2011 4:16:41 PM PDT by Sea Parrot (Democrats creation of the entitlement class will prove out to be their very own Frankenstein monster)
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To: Fred

By late 2006, it was obvious to a lot of people including myself here on FR. We were universally attacked by many here though, unfortunately, we were proved correct.

I don’t recall anyone in 2005 making these predictions.


18 posted on 10/12/2011 4:20:17 PM PDT by packrat35 (America is rapidly becoming a police state that East Germany could be proud of!)
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To: Retired Greyhound
I saw the housing bubble crashing (all bubbles burst), but I didn’t think it would cripple the entire banking industry.

DING DING DING we have a winner! the best post of the day! Yup any moron (except Barny Frank) could tell you a bubble was about to burst. When the average median income in California could not qualify for the average median home, it was only a matter of time. But what was not disclosed is how much paper banks and other institution held. The idea that they bundled and sold to diversify risk ran foul as the banks bought other bank's paper. I had a friend who was at CitiBank and no one knew how deep they were into mortgage paper as separate divisions bought secondary market mortgages and nobody put together the exposure at a top level.. stunning

19 posted on 10/12/2011 4:20:31 PM PDT by 11th Commandment (http://www.thirty-thousand.org/)
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To: Sea Parrot

Freepers have been talking about the housing bubble for 10 years.


20 posted on 10/12/2011 4:21:10 PM PDT by central_va ( I won't be reconstructed and I do not give a damn.)
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To: RobinMasters
which prompts the obvious follow-up question from Todd about just how good his economic instincts actually are

Cain 2005: There's no housing bubble.

Barney Frank 2007: There's no housing bubble.

Barney Frank 2008: Fannie and Freddie are solvent, they don't need bailouts.

Is Chuck Todd kidding?

21 posted on 10/12/2011 4:23:20 PM PDT by montag813
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To: Sea Parrot

Bush actually got up and said that if we didnt do something there was going to be real trouble. And then the asshat didnt do shit about it.

The Bush family is why the GOP is in the shape it is today.

Like you said...all he did was paid lip service to it. I never cared for him or Pappy. Didnt dislike them, but didnt care for them either.


22 posted on 10/12/2011 4:45:40 PM PDT by crz
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To: central_va

So have millions of others, but it did not prevent the inevitable bust.


23 posted on 10/12/2011 4:54:19 PM PDT by Sea Parrot (Democrats creation of the entitlement class will prove out to be their very own Frankenstein monster)
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To: NVDave
I was one of the early people here on FR to start warning of potential home price devaluation (and I was warning of only as much as 15 to 20% - nowhere near as bad as it has become) and then only after March of 2007

It wasn't until the dam broke in the sand states that we found out how truly awful many of the loans were. They were loaning big money to people that had no income. Unless you were in the industry, you wouldn't know that was going on. If you would have known that, your figures would have been adjusted downward...

24 posted on 10/12/2011 5:00:50 PM PDT by EVO X
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To: KoRn
In 2005 VERY few people realized that housing was such a problem.

Me neither, but when I saw my Nevada house escalating in value ($135K to $220K in five years) I had a pre-Prop 13 deja vu experience. Being retired, all I could see is us getting squeezed out by ever-increasing property taxes. Sold the house in 2005, took the cash and bought a manufactured home in the desert, figuring they wouldn't go up in value. They did, dammit, but only for a year. Now down about 10% but that is immaterial as the place is paid for and I expect to leave this one feet first. A positive is that my property taxes dropped.

Outside of marrying the Mrs., this was the best decision I ever made.

25 posted on 10/12/2011 5:37:42 PM PDT by Oatka ("A society of sheep must in time beget a government of wolves." ¬ĖBertrand de Jouvenel)
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To: packrat35; ex-Texan
I don’t recall anyone in 2005 making these predictions.

ex-Texan was leading the way well before then..

26 posted on 10/12/2011 5:42:46 PM PDT by EVO X
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To: EVO X

I wasn’t in the industry, and the way I discovered how absurd the situation was came about when I went into Reno NV for a dentist appointment. I drove north to the Spanish Springs are, saw how absurdly it was built out, and how much *duplicate* retail space there was built into the malls north of Reno on the road to Pyramid Lake.

Then I drove into some of the developments and started asking people “How many of these places are still for sale?”

I was told “Oh, none of them... yet. I live in this one right here, you see, and I own the house on either side of me, and Herb over there owns and lives in that house with the mini-van in front of it — and he owns four more in this cul-de-sac...”

and so on.

When I inquired what they (these two yahoos) were doing, I found out a) they lied on their mortgage apps (ie, they said they would be living in all these houses), b) all of these loans were “interest only,” and c) in some cases, they were stated income.

Oh, and (d), I learned that they had NO, ZERO, ZIP, NADA experience in investing, trading, real estate speculation, you name it. These people were complete and utter rubes where money was concerned.

They were quite up-front about it. They saw nothing wrong (legally or financially) in what they were doing. I asked them how many other people they knew were doing this — and the answer was “about half the people in this development own more than one home here... they’re planning on flipping the ones they’re not living in.”

My blood ran cold. I knew that I’d found the one rock-solid, absolutely positive proof of a bubble: people buying assets with NO MONEY DOWN, NO CLUE, NO PLAN and a get-rich-quick scheme.

I returned to our farm in central NV from that trip and started reading up as furiously as I could on the structure and derivatives markets on mortgage debt. That was the point at which I started to glimpse the size and scope of the mortgage fraud problem here in the US at all levels. It wasn’t long after that when I started warning people here on FR that a hard rain was coming. I was called all manner of stupid back then.

People, it is ALWAYS the same. Go read Kindleberger’s book on Manias and Panics. Bubbles are always, ALWAYS the fault of bankers. They give loans out with little or no money down and human nature and greed do the rest. It doesn’t matter whether we’re talking tulip bulbs, equities or real estate. “No money down” means that the people with stars in their eyes think “how can I go wrong?” and they lever up to absurd levels.

Oh, and BTW — both of the guys I talked to that day were white as a sheet of typing paper. There was no CRA involvement, the banks knew FULL well what was going on, and the loans were made, bundled and sold.

I returned to Reno a couple months later, and made time to poke my long snout into a whole bunch of other developments and people’s business. I learned the same thing was happening all over Reno. In the end, I talked to dozens of people. They all thought they were going to pull down profits of six figures in six months. Every last damned one of them. I didn’t have the heart to tell them that old saw about stock tips and the shoeshine boy on Wall Street... if someone has no clue who the “dumb money” is, odds are, it’s them.

Everywhere I went, I saw lots of building activity... and not enough people to fill up all this space. Some perfectly good ranches were cut up and destroyed to do this, I might add, which makes me furious.


27 posted on 10/12/2011 5:44:15 PM PDT by NVDave
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To: Oatka

That’s great! You cashed in at or near the top. Many ‘professionals’ can’t even do that most of the time. All the better, it sounds like you made the most of it! Very good for you! I just love reading and hearing about stories of success and good decisions. On the other hand, I even more like to hear of mistakes people make, whenever possible. The only thing better than learning from your own screw-ups is learning from those made by someone else.


28 posted on 10/12/2011 5:50:54 PM PDT by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
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To: NVDave

I live in central Illinois. The housing bust in my area is not nearly as bad the sand states and CS 20. My theory is that there was no mega bank presence in my area at the time.


29 posted on 10/12/2011 6:18:04 PM PDT by EVO X
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To: KoRn

Lucky in real estate, lucky in love. Two out of three ain’t bad (don’t ask about the 401K). :-)


30 posted on 10/12/2011 7:29:07 PM PDT by Oatka ("A society of sheep must in time beget a government of wolves." ¬ĖBertrand de Jouvenel)
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To: EVO X

I remember ex-Texan well. I remeber him in late 2006, although he may have started sooner.


31 posted on 10/12/2011 9:12:04 PM PDT by packrat35 (America is rapidly becoming a police state that East Germany could be proud of!)
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To: NVDave

“There was no CRA involvement, the banks knew FULL well what was going on, and the loans were made, bundled and sold.”

Now you’ve done it. You’ve outed yourself as a CRA Denier. The Received Wisdom around here is that the bubble was entirely the fault of the Guv’mint ordering banks to give out subprime loans, which were then all acquired by Fannie and Freddie.

Of course, this Received Wisdom comes largely from the same bunch that (A) never spotted the bubble and (B) claimed its 2008 collapse was imaginary, that it was just the press trying to talk down the economy to help the Democrats.

I live at Ground Zero for the subprime lending business, where all the big subprime firms were located before they disappeared along with everybody’s phantom equity.

I had clients in the business and a neighbor with his own loan shop. In OC house prices hit what should have been their cycle highs in 2003, with affordability below 19%. But prices just kept going up. So I started asking my loan broker friends how their business worked and I started watching for any and all articles on what appeared to be a housing bubble.

One of the best sources I discovered was the The Housing Bubble Blog, started by one Ben Jones back around 2005. This turned out to be a gold mine of information where a disparate group of investors, appraisers, and various real estate types shared their perceptions of something seriously wrong in the mortgage market.

But I digress. You are correct that the CRA wasn’t the big culprit here. Wall Street investment banks weren’t covered by it. They jumped into subprime without the slightest push because they could see huge profits to be made in developing that market.

They funded the storefront loan brokers, bought their paper, bundled it, built derivatives on top of it, and sold it all over the world in direct competition with evil old Fannie and Freddie. The most extreme loans, the NINJAs, option ARMS, zero down 110% loans, were created by the investment banks and hedge funds that worked with them.

I knew this was all going to come to an ugly end and badgered my friends about it. My real estate pals had convinced themselves that Real Estate Never Goes Down and didn’t want to hear my heresies. One loan broker friend of mine had a $2 million house and a string of rentals. She ended up losing all of it. Equity comes and goes but debt lasts forever. Last I heard she was renting a room from a friend.

The only thing that surprised me about the bubble was its true size. I knew it was big, but at some point I discovered that the derivatives built from these mortgages amounted to trillions of dollars. And that is why the collapse shook the world and it’s why recovering from the bubble is going to take a very long time.


32 posted on 10/12/2011 10:47:01 PM PDT by Pelham (Immigrating America into just one more Latin American country.)
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To: RobinMasters

This article is another steaming pile of crap.

In 2005 and even long into 2006 there were plenty of so called financial gurus who denied the existence of a housing bubble.

I wonder what OSTUPID’S position on housing was in 2005?


33 posted on 10/13/2011 2:00:54 AM PDT by 101voodoo
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To: crz

On several occasions Bush called for the tightening of regulations for home buyers and he warned of the consequences.

What, exactly should he have done? It is up to the Congress to pass the laws which govern this sort of thing.


34 posted on 10/13/2011 2:05:42 AM PDT by 101voodoo
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To: Pelham

On the subject of “real estate never goes down:”

When we came up into Wyoming, Wyoming had been enjoying strong real estate prices for a decade or more. They didn’t see the insane gains that were seen in California, Arizona, Nevada, et al, but strong pricing power. Properties went on the market at price $P and they didn’t negotiate off that price. They just waited until they got it. The last time Wyoming saw any serious slowdown in their real estate market was the mid-80’s, when the oil slump in TX/OK happened. A little bit of that slopped over into WY.

Anyway, in mid-2008, we’re in a realtor’s office and discussing an offer we’re putting in. We offered $X and the agent told us this offer “was less than the people owning the house had paid a year earlier.”

We said. “OK,” and received this news with no reaction on our part.

The agent again said “Well, I don’t know if they’ll even consider this offer... it is less than they paid for the property a year ago!” being very emphatic about the mathematics of the situation.

Without being annoyed, I just said “So....?” and the agent looked at me as if I could not possibly be serious. My wife added “Real estate prices *can* go down, you know...” and the agent and the owner of the brokerage looked at us as tho we were at a funeral and had just broken wind loud enough to cause an echo. My wife and I looked at each other and smiled, then turned back and said “It’s true. We’ve seen it happen. We can assure you that these things DO happen.” I added “I can assure you, it is going to happen here, too.” By that time, I knew how bad this mess was going to be. When I started to describe the couplings in the mortgage market, the idiocy at banks, the leverage that was involved that was going to unwind... and then I made a prediction that Fannie and Freddie were going down for the count, they were broke/busted/done... you could see two things happen: The agent/owner’s faces registered alarm that they had a customer that knew this much about the mortgage market in *their* office (”Who let this guy into the state, much less our office?! How do we get rid of him before he tells anyone else?!”) and then they registered dread - sort of a “If he’s a newcomer and he sees the big picture of what is going on, the gravy train really is over.”

Today, the Wyoming market now realizes what I had suspected in 2007-2008: That a lot of the price appreciation in properties above $250K was due to people packing in equity from OTHER real estate markets, ie, that the local economy does not and can not generate the cash flows to service a mortgage on a property higher than $300K in price. You see properties under $250K moving pretty well right now... and you see mega-buck homes built in the boom that have been on the market for four to five YEARS... with an 8% reduction in price every 18 months or so. Absurd prices, where people just cannot grasp that the underlying funding of the market has changed for possibly decades to come. I see ranches here that can support only 100+ cows going for $4 million. When I see these, I laugh my ass off and ask “So, tell me, is the seller growing dope or do their cattle poop gold nuggets? I’m just asking so I know whether to buy a special harvesting rig or truckloads of rubber gloves as my inputs...”

Real estate agents don’t seem as amused as I am, tho.

Back to the CRA: The CRA might have contributed a bit to the issues, but no one had to force the banks to make PRIME, CONFORMING loans. They just did. And their underwriting standards on PRIME, CONFORMING loans were every bit as shoddy as the sub-prime, NINJA and other crap paper. All we have to do is look at the default rate on prime paper, and we see that it is absurdly high and CRA doesn’t even enter into that tranche.

The bankers’ underwriting, funding, and assignment practices we’ve now learned, were shoddy everywhere. The bankers did this to the US, and it was their greed. I maintain that the banking industry was infuriated with envy following the dot-com bubble. Bankers think that they should be making the billions, not any smelly little engineer/geek off on the other coast. In their fury to get even with the techies, the bankers developed a system of finance which allowed them to get rich just as quickly as engineers did in Silly Valley, but with much less work and a whole lot of fraud.


35 posted on 10/13/2011 8:56:21 AM PDT by NVDave
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To: 101voodoo

“On several occasions Bush called for the tightening of regulations for home buyers and he warned of the consequences.”

I believe you are confusing the Bush administration’s concerns about over-leveraging at Fannie Mae with a concern about loans to unqualified buyers.

The Bush administration was rightly concerned that Fannie and Freddie’s ratio of loans to equity had grown to unstable proportions.

But Dubya was a cheerleader and enabler of granting home loans to “underserved” minorities, aka the subprime market. His “American Dream Downpayment Initiative” speech to HUD is a classic of bubble era folly.


36 posted on 10/13/2011 5:17:43 PM PDT by Pelham (Immigrating America into just one more Latin American country.)
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To: RobinMasters

What did Chuck Todd and the liberal media do to stop the housing bubble?

Nothing. They caused it!


37 posted on 10/13/2011 5:22:13 PM PDT by o2bfree
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To: Pelham

“Dubya was a cheerleader and enabler of granting home loans to “underserved” minorities, aka the subprime market. His “American Dream Downpayment Initiative” speech to HUD is a classic of bubble era folly”.

Correctamundo.


38 posted on 10/13/2011 5:38:19 PM PDT by SharpRightTurn ( White, black, and red all over--America's affirmative action, metrosexual president.)
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To: NVDave

“Today, the Wyoming market now realizes what I had suspected in 2007-2008: That a lot of the price appreciation in properties above $250K was due to people packing in equity from OTHER real estate markets, ie, that the local economy does not and can not generate the cash flows to service a mortgage on a property higher than $300K in price.”

At the housing bubble blog some of the investors talked of formulas they use for buying houses- they’ll pay 100 times monthly rent for a normal property. Maybe up to 120 times if the neighborhood has something special going for it.

Then you take the median income for a region, and use the old formula of 2.5 times income for a mortgage loan. This gives you a ballpark idea for what sort of prices ought to be supported by a local economy.

Applying these metrics to prices in SoCal made you shake your head in disbelief. The coyote had run off of a very high cliff and was suspended in space. When he started falling it was going to be a looong way down. My dire predictions were hooted down by my RE pals. “You don’t know anything about real estate! Shut up!”

Well I didn’t know all that much, they were right about that. But I did know more than they did, something that still sticks in their craw. Prophets of doom tend to get blamed for the doom itself.


39 posted on 10/13/2011 5:39:52 PM PDT by Pelham (Immigrating America into just one more Latin American country.)
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