On Wed, Oct 20, 2010 at 8:57 AM, Dan Minette <danmine...@att.net> wrote: > > > In hindsight, the housing bubble is obvious. Heck, at the time, I knew > there was a housing bubble, and if you look at Brin-l archives, you will > see > that I wrote it. >
It was clear that values were high. That was always clear to me. But HOW high? And for how long would they stay high? Aside from a handful of people who, by intelligence or luck - and we can't know which - profited from the mortgage crisis, the experts who made a business of making loans, failed, badly. When somebody who underwrites real estate loans for a living can't value property, how can an ordinary person be expected to do so? The industry still doesn't really know the values. My mistake was to trust the market and the industry. If the industry had done nothing wrong, then the market would not have over-valued real estate. > > So, I'm finally at my point, if someone buys a house that is clearly > overvalued, as houses in the SF area still are, why should someone else pay > their loss? Is it any different than putting one's retirement money into a > NASDAC index fund in 1999? Yes, it is quite different. For one thing, housing is not a investment for most people. More to the point, retirement isn't borrowed money. When the stock market has had the equivalent of appraisers (analysts) inflating their valuations to whatever price the buyer and seller agreed on, they have been successfully sued in class actions. Yet that sort of thing was rampant in the mortgage market. Loans for buying stock are highly regulated so that when a bubble breaks, it has to be an enormous drop (compared with the drop in housing values) to leave the borrower under water. There's nothing like 100 percent financing in the stock market, at least not legally. If a stock broker followed the predatory lending practices of mortgage companies, they'd be drowning in litigation because of the way that industry is regulated. And there are huge differences in disclosure regulations... but the mortgage industry couldn't even possibly meet any disclosure requirements because the selling of default swaps and such make it impossible even for them to know the value of the properties on which they made loans. Nick
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