August 1st, 2007
I often hear, particularly from my conservative friends, that the housing bubble is just a symptom of the market, that there’s nothing intrinsically evil about it, that realtors are just doing their jobs, ditto mortgage houses, that all a bubble does is separate fools from their money, etc. There is a certain free-market comfort to these sentiments. Nonetheless, they’re bosh.
The current bubble was built by realtors and mortgage operations giving loans to people who had no (financial) business buying property. These people have begun to default at an alarming rate, but the point is that this spending spree doesn’t just wreck the individual who gets foreclosed, it hurts everyone in the market, because those soon-to-be-foreclosures drove up the price for everybody else.
Still, my conservative friends argue, it wasn’t like the realtors and mortgage people were committing malpractice or anything. Maybe, maybe not. However they seem to have acted at least close enough to ambulance-chasing trial lawyers to have earned public scorn.
To wit, we have this fantastic story about a woman in the D.C. suburbs finding a lost wallet and using it to two mortgages (two!) to buy a $419K townhouse with no money down.
Yup, that’s some darn fine due diligence there. And make no mistake, this sort of thing hurts everybody. Except, of course, the realtor! Bet they didn’t have to give back their commission.
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