The Geniuses at WSJ Figured it Out: Speculators May Have Accelerated Housing Downturn

[El Pinko]

Congrats, repuke whore business "experts"!!!

:applause:

You know know what those of us with functioning brains knew almost four years ago!


http://online.wsj.com/article/SB120225852189145889.html


Speculators May Have Accelerated Housing Downturn
By Ruth Simon and Michael Corkery
Word Count: 831 | Companies Featured in This Article: Toll Brothers
As lenders pore over their defaulted mortgages, they are learning that the number of people who bought homes as investments is much greater than previously believed.

Such borrowers turn up frequently in analyses of loans that defaulted within months after origination. In many cases, these speculators lied on loan applications, saying they intended to live in the homes in order to obtain more favorable loan terms or failed to provide the requested information.

Roughly 20% of mortgage fraud involved "occupancy fraud," or borrowers falsely claiming they intended to live in a property, according to an analysis by BasePoint Analytics, a ...

[fasttense]

1. I'm surprised Murdoch's journal would allow this to see the light of day.n/t

[El Pinko]

2. I was living in SF in 2004.

At the time I read in the Chronicle that only 15% of bay area residents could afford a bay area median priced house. The median income was about $80K, and the median house price was over $600K. That's a multiple of 7.5. 3x medium income is the normal trend, regardless of what area of the country you're talking about, so I knew then that the prices were not sustainable. Oh, and by that time, over half of the new mortgages in the area were subprime and other exotic mortgages...

But then I'm not some MBA genius writing at the Journal. I'm sure they thought housing was the new paradigm, etc. etc. :eyes:

[gratuitous]

3. There was story on house flippers a few months ago

Just as the bubble was about to burst, there was a story about house flippers. The usual "gee whiz" reporting about how prices had gone up and how quickly people were turning five- and six-figure profits for a very short-term investment. They quoted one speculator (of course, the story didn't call him a speculator), who was moaning about how much tougher it was getting to turn a decent profit. His conclusion was that there were now a lot more people dipping into the market to make a quick score and that had kind of ruined it for him.

This was reported with a straight journalistic face, as if the prospect of easy financial pickings wouldn't draw an enormous crowd.

[nashville_brook]

4. i had a freelance gig with a real estate investors association -- it's worse than

20 percent, i assure you -- and it's out in the open. i edited their newsletter and designed marketing materials for their SEMINARS, both of which encouraged mortgage fraud and title fraud at every turn. the worst part was that they held up fraudulent practices as strangely moral in that they "build wealth." ergo, anything that builds "wealth" is moral. it's a turn on the mega-church worship of prosperity.

the thing about the "exotic" loans is that they were used primarily in the investor/speculator industry -- for people who weren't homesteading the properties. on these loans, you could use the imaginary future income from renting the properties as proof of assets.

going back to my work with the real estate investors group -- the foundation of their practice is to build up a paper empire. "wealth-building" as they call it, is nothing more than a ponzi scheme -- and the poor working class people who were drawn into this -- were blinded by all the "get rich quick" claptrap. every month there was a paid "speaker" (read: snake oil salesman) who rallied the troops with false hope of "never working again" -- if you bought his $1,000 wealth-building kit, that is. there were nights were they brought in more than 100,000 bucks on these ridiculous, content-free scams.

god i hate these people.