Abigail Field | Setting the Record Straight: The Housing Bubble Lie

Setting the Record Straight: The Housing Bubble Lie

By: Abigail Caplovitz Field

Let’s get something straight: we did not have a housing “bubble”, in the usual sense of the word. The mainstream narrative of crazed, greedy, irresponsible homeowner-wannabes driving prices unsustainably high, causing the still ongoing crash is wrong. Yes, we had a housing “bubble” in one sense; prices soared way beyond reality because excess demand fueled irrational bidding wars. The lie deals with why we had a housing bubble. The lie matters because like all problem-defining narratives, it shapes the policy solutions offered. So let’s take a look at the lie.

Consumer Driven Bubbles

The classic example of a demand-driven bubble is Holland’s tulip craze in the 1600s. A much more recent version was the DotCom fever a couple of decades ago. And at the risk of dating myself, the most vivid consumer-good craze of my youth was “Cabbage Patch Dolls” (not that I had one; I wasn’t into dolls.) How did these bubbles happen? Simple. Irrational economic actors, that is, normal people acting as consumers, got a kind of mob/herd madness/fever and outbid each other endlessly, until suddenly reality intruded and they stopped.

But here’s the thing: Houses are not like tulips, shares of stock, dolls, or any other mass-market consumer product. They just cost too much. The only people who can buy a house simply because they want to are cash buyers. No one will argue that cash buyers drove the housing bubble of 2005 onward (or whatever year you want to peg its start.) Cash buyers don’t fuel a foreclosure crisis either, though banks have been known to foreclose on cash buyers anyway.

We didn’t have a housing bubble in the ordinary sense because consumers don’t buy houses; banks buy houses. The housing market cannot undergo a demand-driven bubble without lender collusion and complicity.

Rest here…

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4closureFraud.org

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One Response to “Abigail Field | Setting the Record Straight: The Housing Bubble Lie”
  1. ms. abigail field where were you when we needed you? lost $400,000 buying real cabbage patch homes for retirement planning and just plain residential living!! questioned the appraisal? of coarse it was accurate since the county sent an increase in tax bill 3 months later!

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