New research shows that flippers and investors are more responsible for the housing crash of 2008 and near economic collapse, then subprime borrowers per this article
What are everyone's thoughts?
Admittedly I didn't read this article, but I the findings of most research varies depending on who is funding it.
Concerning the crash, and most large events throughout human history, it wasn't just one factor or another. The borrowers shouldn't have borrowed the money, the lenders shouldn't have lended it, and the government shouldn't have backed it and encouraged the lenders. Everyone played their role, and each player blames the other.
I'm not sure I agree with investors being "more responsible" than subprime borrowers, but it is a thought provoking article.
Left leaning publication alert.
So, pointing a finger at us mean, greedy capitalist real estate people is not out of the realm of possibilities for this publication.
Anyone can present factual information, but do so in a “cherry pick” manner and support any conclusion you start out to support. Just saying.
I found the article to be guilty of the cherry picking I mention as it only focuses on a very narrow topic that may have in fact contributed to the crash. Saying it caused it, that is a huge stretch to me.
This is not news, this is an attempt at class warfare. Prime and subprime mortgages both defaulted at unprecedented rates, especially subprime. "Poor" and "reckless" and "stupid" are not statistical cohorts in data analysis.
I wasn’t selling bonds filled with junk in them and neither were most flippers.
If you read the article, their definition of "flippers" is drastically different than most real estate investors' definition. They are not talking about professional "fix and flip" investors. (at least that's what I'm referring to when I say "flippers") They aren't even referring to real estate investors in the traditional sense. They use the term "speculators". These were non-investors who jumped into the real estate market because of all the hype that was associated with the real estate boom. They wanted to get a piece of the action that they were constantly reading about, even though they didn't know what they were doing. They did this with a purchase of a second or third home that they expected would continue to appreciate in value, and that they could sell in a couple years at a profit. This was a classic case of a game of musical chairs where the amateur latecomers were left standing when the music stopped.
The article should more appropriately have been titled "Amateur Speculators Triggered the Housing Market Crash".
One of the best quotes I have ever read came from Tom Woods' book "Meltdown". I will paraphrase, but he said blaming the crash in 2008 on greed was like blaming a plane crash on gravity.
There were MANY MANY factors that led to the environment that created the crash in 2008.
@Eric S. This is just another attack on capitalism by the socialists. They all want to live in the utopia socialist environment, but don't realize it has led to more destruction and death than anything else in world. Just move to one of those countries and you'll be soon running back home as fast as you can.
I only read the article twice, so maybe I missed it, but they appear to be defining every single person who had more than 1 mortgage as an investor. Obviously, that's not true
I wrote a thesis on the 2008 recession in college, and I agree with the previous statements that the article is not looking at many important factors. it also seems to be using incorrect definitions for "flippers". I don't have time to go into details as I am at work, but there were many many factors much more responsible for the crisis than people who bought a second home with intent to resell. Furthermore, by the time these people entered the market, the housing bubble had already been underway and likely ready to pop as is.
It was the banks!
The federal reserve created the last housing debacle. When they set interest rates so low people do not understand the real cost of money. This creates malinvestment!!!!
If you haven't seen the movie "The Big Short", go watch it. It's pretty good. The main cause was subprime market and everything that went along with it. FYI, I'm not basing that because of a movie. It was a movie made to showcase that piece of it. Of course, there were other factors, BUT, to use the airplane example, it's like saying we crashed because the flaps didn't work. Well, the flaps didn't work because the engine blew up and destroyed them. The Subprime market is the engine in case that didn't come through :).
I recall that it was a multi pronged problem. Subprime. WS securitization of same. But 3 of the major changes were the increased requirement that Fannie & Freddie were forced into by WH policy, the proliferation of shady mortgage brokers and no money down lending.
WH policies forced Fannie & Freddie to extend more credit (Clinton&Bush). WH policy raised the level of mtge F&F had to buy from banks/brokers from $253k in '00 to $417k in '06. With wages stagnated, most $250k buyers didn't become $417k buyers in 6 yrs.
Then banks & brokers falsified data, and issued credit to people who would never have the means to repay. Many elderly got caught up (my Gramps, a ww2 vet, was one). Less than a year from full payoff, longtime pension & SS beneficiary, he was approved for a loan that required monthly pymts = to over 75% of his total take home.
And finally, no doc & no money down lending by banks/brokers meant many had no skin in the new game. Walking away from a house you don't have equity in was easy to do.y
In short, it's too easy to dump it all on investors.