>> I know several flippers that frequented the RRE thread that bought as many as TEN houses (in Florida and CA) through flaky, stated-income mortgages (liar loans), intending to flip them quickly for a profit. Some did this more than once! Most got caught without a chair when the bottom fell out.. Only the lucky made out.
>> There were HUNDREDS of people like that.
This is a constant in the RE business. Happens every day. One of the most successful real estate people I knew (now dead, a former client who started a public company, the name of which you would recognize), rarely took possession of a piece of real estate the entire time I knew him -- instead, trading solely in contracts. It is a technique only the best RE pros use and the ultimate speculation. This was 30 years ago.
But there is no evidence these natural market events "cause" housing bubbles. And in fact, the most recent housing bubble has been shown, in great detail, to be a direct result of policy under Carter, Clinton, and the influence of congressional Democrats.
What exactly is the connection between this small number of realty pros engaging in speculative behavior and any housing bubble? I've known a number of people who, for example, traded bulk paper (not paper as in debt, but paper as in milk cartons and cardboard boxes) in exactly the same way as the real estate person I mentioned. Yet, there is no "paper bubble". I've known many, many people who traded used cars in the same manner. No used car bubble.
In fact, what causes bubbles in real estate is something that is absent in these other transactions -- leverage. Lending too much money against a given piece of collateral -- that's what's dangerous. Because ANY property that is being traded will appreciate and depreciate over time. What makes it dangerous is the excessive leverage present in real estate transactions.
Where does the leverage come from? Barney Frank. Carter's CRA. Clinton's "enhanced" CRA. Fannie & Freddie, under the direct of fat-cat liberals who are soaking investors. The only danger in these transactions is that when the music does stop, there is no money to repay the leverage. |
