American Housing Crash Top 10 Causes
1.The Federal Reserve Interest Rate Manipulation:
The Federal Reserve "the fed" created a storm through artificial interest
rate manipulation! Instead of a supply vs. demand, free-market based
housing industry, 40-year-low interest rates set by "the fed" created an
artificial demand for housing as an investment. When it comes to
crashing economies and creating bubbles, no-one does it better than the
federal reserve. "the fed", owned privately by a small number of
multi-national elite families, "the fed" is no more "federal" than Federal
Express and could care-less about crashing the entire U.S. economy.
When a countries entire banking system is run by
privately-owned foreign interests, market booms and busts are inevitable and
a great way for corporate wigs and "fed" insiders to consolidate, commit
insider trading and reap rewards by timing the market-cycles that they
The ironic truth is that
former Fed chief Alan Greenspan actually
encouraged use of the seductive ARM and sub-prime loans!
In April 2005, Greenspan said:“Innovation has brought about a multitude of
new products, such as subprime loans and niche credit programs for
immigrants . . . With these advances in technology, lenders have taken
advantage of credit scoring models and other
techniques for efficiently extending credit to a broader spectrum of
consumers . . . Where once more marginal
applicants would simply have been denied credit, lenders are now able to
quite efficiently judge the risk posed by
individual applicants and to price that risk appropriately. These
improvements have led to rapid growth in subprime
mortgage lending . . . fostering constructive innovation that is both
responsive to market demand and beneficial to
Learn more of the truth about the "fed"
Home Flipper$ and Real Estate Speculators:
With the low-cost of borrowing due to low-interest rates, real estate became
a get-rich-quick scheme for millions of investors and property traders.
House flippers and price speculators used the artificial demand in housing
to buy properties and re-sell them for fast profits, sometimes buying and
selling properties before they were even finished being built!
With so many
property-flippers and speculators in the market, home prices began to
sky-rocket as everyday home-buyers often were trapped into bidding-wars
against real estate market profit seekers. In addition, former
everyday home-owners decided to get into the housing market and buy
additional properties to get in on home prices that were rising into the
stratosphere. During the prime home-price boom-years (2002 - 2006), it
wasn't uncommon for a home flipper to make gains of ten$-of-thousand$
and even hundred$-of-thousand$ of
dollars by buying homes and reselling them a few short months later.
Realtors and other real estate market insiders used the previous history of
ever-rising home prices as a fear tactic to scare first time homebuyers into
buying a home before prices got even higher! Potential home owners and
fence sitting home buyers were manipulated by an industry tactic known as Fear of Being
"priced-out" of the housing market forever.
Quotes like "home prices never fall" and "real estate only goes up" were
common sales tactics with realtors and home sellers everywhere.
Renters were ridiculed as being naive and "missing the boat" on real estate
blogs and in conversations about housing "owning vs. renting" debates.
Millions of people across the nation were led to believe that if they didn't
purchase a home immediately then they would be priced out of the housing
If home prices had never fallen in the past then it must have been
impossible for prices to fall, right?....WRONG!
Past performance is never a guarantee of future performance in any market,
especially a bubble market.
Subprime mortgages, Exotic loans and Loose Lending
It wasn't just fraudulent mortgages that helped inflate home prices.
Many exotic mortgage products were used to help potential home-buyers
"qualify" for the loan.
No-document loans, known in the industry as "liar-loans", were everywhere
from big banks to small-town mortgage companies who didn't bother requiring
a home buyer to actually have income to cover the mortgage payments.
Down payments were no longer required and many cases. Ever-rising home
values would outweigh and possible bad-loans and prevent even the jobless
from missing payments.
Homes became ATM machines for families to cash-out equity for home
improvements, automobiles, vacations, furniture and more. Needless to
say the mortgage companies and loan officers were loving their hefty,
although temporary profits!
5. Media Propaganda:
It's no secret that real estate is big business. And big business
means big profits for the advertising agencies. The media was a major
contributor in pumping-up the housing bubble. The real estate
industry became a leading source of revenue for many newspapers, magazines,
billboards, radio stations and more. Articles were printed that
promoted the buying of homes and making renters feel like they were fools
for not buying a home. Money and finance magazines printed articles
about the masses getting rich on real estate.
Newspapers would print articles that had real estate agents saying that home
prices are rising rapidly in (enter hometown here) because "everyone wants
to live here" or because the local economy was great.
Real estate advertising everywhere was heavily involved and profited heavily
by the mega housing bubble that was sweeping across the nation. Also, the Fed has a relationship with big multi-national media corporations which is largely un known by the public.
6. Mortgage and Appraisal Fraud:
Rising home prices were enticing to
crooks too! Dozens of cases a month of mortgage fraud and appraisal
fraud became common in counties across the US. Appraisers were
pressured by lending institutions to inflate appraisal prices so the the
loan could close. Shady mortgage companies opened their doors by the
ton so that they could reap the rewards of selling loans to desperate
home-seekers and re-financing existing home owners into lower monthly
payments due to all-time low interest rates.
Mortgage companies became telemarketing monsters who would call homeowners
over-and-over again until the papers were signed, sometimes without
disclosing the terms of the loan or plain-out giving false information to
the customer and many times forging documents to alter signatures, income,
or other data to get the loan closed!
This caused a surge in fraudulent mortgage applications, false appraisals,
and planting straw-buyers to purchase over-valued homes. Hundreds of
mortgage companies were under investigation for shady lending or had to
close their doors due to pressure from the eventual crackdown on the
fraudulent business practices. Many mortgage company CEO's and even
appraisers ended up serving jail time for these practices!
Realtors on Commission
Real estate agents across the nation, and especially in hot markets, began
to see ever increasing profits due to earning higher commissions on the
sales of bubble home prices.
Higher home prices equals higher commissions for the Realtor selling the
During the real estate "boom-years", it wasn't uncommon for real estate
agents in hot markets like Florida, California, Arizona, and other areas to
make hundreds of thousand dollars a year for selling bubble priced houses to
flippers and everyday homeowners alike!
Simply put, if you're paid on commission, a higher selling price and
therefore a housing market bubble is a welcome event!
Instead of negotiating a better deal and lower sales price for the buyer,
Realtors were not on the side of the buyers because it was not in the
realtors best interest to have a lower selling price on a home because a
lower price meant less commission for themselves. Home buyers were
encouraged to bid and bid higher as homes received sometimes multiple
offers, thus raising the price even higher, all to the selling realtors
8. High home Prices = Bad
Investment: Rental Income Cannot Cover the Mortgage on a
Bubble Priced Home. Example: You pay $500,000 for a 3 bedroom / 2
bathroom home, borrowing at a 6% APR would put your mortgage payment near
$3,000 a month. That same home will only fetch half-of-that ($1,500
per month) amount if you are lucky. Obviously, the buyer of a bubble home
will need to pay the difference out of their own pocket. Throw in
taxes, maintenance and, in some cases, HOA fees, and you better have
some major money in the bank to pay the difference.
The rise in home prices made it extremely difficult for new wanna-be
landlords to get into the housing market because the high mortgage payment
would not cover what would be gotten in return for the rent. Once the
flipping game was over when their were no greater fools to buy the
overvalued asset, very few buyers were left as most wise investors had
stopped buying homes or exited the market completely.
9. Foreclosures Double Edged Sword:
Foreclosures hurt the housing market in multiple ways. First, the
surge of foreclosures puts pressure on the supply/demand ratio as a glut of
bank owned homes hits the market in a given area. Second, the sight of
the foreclosures themselves puts it's entire neighborhood in a bad light as
the eyesore of an abandoned property and the for sale signs that glut the
street tell potential buyers "DON'T BUY, DON'T BUY". Finally, the
banks are desperate to unload foreclosed homes at a low-ball price, thus
reducing the median sales prices and sales comparables for the surrounding
area. Banks are not in the property management business and will sell
an empty home at fire-sale prices to avoid upkeep and maintenance.
10. The Economy Stinks: The
United States Debt-Based, Pro-War Economy has racked-up enormous debt!
The US occupation in the middle-east has
slammed the U.S. economy, whose woes now go far
beyond loose mortgage lending. You cannot spend trillions
upon trillions of dollars for an overseas escapade and not get hurt here at