I’m listening to the day’s Planet Money podcast. Near the end there’s a discussion about economists arguing over the matter of the housing bubble during the housing bubble. Namely, whether it was a bubble or not. The past 2 years has pretty much answered that question.
I can’t say that what I’m about to state is a benefit of hindsight or age related memory issues, but I’ll state it anyway. I saw it coming. Not the exact shape or form of it, but definitely a very large shadow.
I can recall the time I was looking to buy a house. Many different voices were telling me that houses were great investments. You’d be crazy to miss the opportunity. Even if you didn’t make money, you couldn’t possibly lose. At worst it would be a vehicle for capital preservation that was resistant to inflation. At it’s best, the house was practically spilling money out into the streets.
I was out in San Francisco for a wedding and I heard all of these wild stories about real estate property. Literally all of the stories boiled down to, “These people bought a house at a certain value and now it’s worth a lot more than that.” I looked at these properties and I’m certain that I had puzzled expression painted on my face when quoted the prices. These were houses that I wouldn’t even consider buying at the obscenely inflated prices quoted to me had I even the money available to me.
Back in Texas it wasn’t as bad as that during the bubble, but I started hearing it from people whom I considered to be level-headed. I started to have an uneasy feeling that there might be a frenzied hysteria in the air. It was when I began talking to real-estate agents and lenders that I realized that all this excitement about real estate was full-on crazy! Option ARM! Lenders who outright lied to my face about interest rates and my credit worthiness. One lender, who upon looking at my yearly income, wondered why I didn’t invest all of my money in rental property. My own real-estate agent was pointing me to a house bigger than I needed or was willing to afford. In the end I made choices like I’ve always made where money is involved. Conservatively.
The worst part of the whole situation was that I couldn’t trust anyone during the process of buying a house. Not the lender, the seller or the agents. Had I been the seller, I could’ve benefited from my agent’s greed. But because I was the buyer, I couldn’t even trust my own agent.