Mickey Kaus has some doubts about the housing crisis. A drop of 6.6% in average prices after the run-up of the past five years doesn’t seem like much of a “crisis” to him, or to me. I remember 1993 when we had a real crisis in California. I bought my house in 1991 when prices were already soft. I had gotten divorced a few years before and swore I was through with expensive houses. There is an old saw among doctors I know that goes, “You don’t have to get married. All you have to do is find a woman you can learn to hate in ten years and buy her a house.” I bought a couple of those. Anyway, I was determined to stick with a smaller house and buy it as cheap as I could. I made low offers on a couple of houses. One was so low that the realtor refused to submit it to his client. I waited 72 hours (as specified in the offer) and bought another house from a seller who was willing to counter. I got the house for about 15% under the asking price. Two years later, the value had dropped by 25% on an appraisal. It eventually recovered and the house is now worth three times what I paid for it. The people in trouble are those who bought more than one house in order to “flip” them, or those who paid too much assuming that trees grow to the sky and prices never fall. I have little sympathy for any of them. The decline in prices in California is a fraction of the rise of the past few years. Houses are not selling in my neighborhood but that is probably a function of buyers anticipating price drops and sellers refusing to go along. I don’t know who is right but, aside from overpriced condos, nobody will lose money by waiting, at least in the California market. Of course, that doesn’t help left wing newspaper reporters who need a story to bash Bush.
The dirty little secret, now coming out thank God, is that so many people were doing serial cash-out refis to buy toys. And now they’re underwater when they “need” another fix.
I suppose it’ll be political and be called the Bush Bubble, but there’s plenty of blame to go around, including and especially to those elements who pushed for “innovative lending” for high risk poor and minorities. That all started back in the first Clinton term.