Bonner on Housing

From Lew Rockwell:
Lifting IQs

“Nothing lifts I.Q.s more than a property boom.”

“America’s real estate bubble has created a whole nation of geniuses…people who think they are smart because their houses have gone up in price. And the smartest of them weren’t content to merely watch prices rise; they took advantage of them by leveraging themselves into more and more expensive properties.”

“”I’ve watched him over the last few years. He bought one condo before it was built. He flipped it and bought another one. And then, he bought a whole bunch of them. To him, the secret of getting rich seemed so obvious. All you do is buy beachfront condo at pre-construction prices…and then flip them to someone else. And when he asked me about it, I’d just say, ‘Well, I don’t know how much longer this boom is going to continue.’ He must have wondered what was wrong with me. He was making a fortune. I just didn’t get it.”

“There must be millions of real estate speculators, concentrated in the hot markets on both coasts, in similar situations. They’ve stretched to buy. Now they’re stretched to keep up with maintenance, taxes, condo fees, and interest payments. Their neighbors bite their tongues. “I told you so,” they itch to say.”

“Don’t worry, say the experts. The boom may have peaked out, but there should be a soft landing.”

“”I’m not so sure,” continued our speaker. “People say the property market can’t collapse, because houses are tangible and people have to live in them. They compare housing to stocks, for example. The stocks can fall 90%…or even disappear. That doesn’t happen with housing.”

“”No, it doesn’t happen the same way, but a much smaller decline in housing prices can have a much bigger impact on people like my neighbor. Let’s say prices go down just 10%. That’s not much. We could expect at least a decline of that much. But a lot of people don’t have 10% equity in their houses. They’ve bought with zero-down mortgages – or maybe 5% – never expecting to have to pay off those mortgages.”

“”Instead, they were counting on price increases, either to refinance or to sell. If they are forced to pay a mortgage greater than the value of the house, they are going to be in big trouble. And a lot of them aren’t going to make it.””

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22 Responses to Bonner on Housing

  1. Anonymous says:

    There’s probably a lot of ppl like this but I would imagine majority of the ppl who bought were not. It would be interesting (probably impossible) to see some data that would show just how many were “flippers/investors” versus people who just bought a house they intended to live/stay in for the long haul. And how many overstretched versus how many will have the ability to ride it out.

  2. Remember why the new Bankruptcy Law was passed to prevent future massive filings ?!!!!!

    Greenspan: Housing calms Boom ‘over’; Bernanke agrees.

  3. Anonymous says:


    No one is forcing you to pay these ripoff house prices…then DON’T DO IT!



    Use a little common sense.



  4. Anonymous says:

    The people reading this blog are not the ones who are buying.


    Wise Up!

    Use a little common sense!

  5. Anonymous says:

    Bob has nothing better to do than post on this blog

  6. Richie says:

    I love how everyone says:

    “Don’t worry, say the experts. The boom may have peaked out, but there should be a soft landing.”

    “SHOULD”… I’d like to see someone guarantee it.

    Where’s that chart from the great depression where all these people were saying the worst was over and they hit bottom already?


  7. Anonymous says:

    I think it’s just safe to say soft landing because there will be no crash i.e. tech stocks.
    maybe 10% over 3 years vs 30% this year? what do you think?

  8. Anonymous says:

    Soft landing is a new line used by the “Shills” to train the sheople to be good zombies. Do not think. Just follow.

    Boycott Ripoff Home prices.



  9. Anonymous says:


    It is not impossible to see data on investors vs. actual primary (to live in) homebuyers. I have seen referenced several times, figures for the % of homebuyers from last year who not buying a primary home, ie. they were buying 2nd home or greater. I think it was something around 29%, can’t remember for sure, perhaps Grim or someone else remembers.

  10. NJGal says:

    OT, but I had to point out some info about my *favorite* town, Maplewood – on Burgdorff, which now lists most MLS listings, there are 115 homes for sale. Earlier this year, around February, the number was in the 50s. There are 22 open houses for Burgdorff listings alone, not to mention how many others there may be for other realtors. Many of these open houses are repeats, by the way.

    When I looked there in 2004, there was maybe one open house per weekend.

    But the market is fine. There’s no correction coming. None at all.;)

  11. Richard says:

    njgal, to each their own, but i just don’t understand why you’d want to live in maplewood. you’d have to pay an enormous sum for a house and going property taxes and the area is clearly in decline. ever drive by columbia high school during recess? i’m in south orange and i can’t get out quick enough. in the year i’ve been ni south orange, i’ve noticed an increase in undesirables in and around town. same for maplewood but more on the west side near the fringe areas. south orange is leading with maplewood to follow suit.

  12. Renter says:

    What do you guys think homes that cost $600,000 now will drop to by next year?

  13. NJGal says:

    No, I don’t want to live there but I see it at as a prime example of the bubble. I have friends who live there and told us to look there and while the houses are cute, the area is ugh. I think it’s a perfect example of the bubble mentality that houses valued at 300K in 2004 are going for 600K now. With bad taxes, bad schools, how is that justified?

  14. Anonymous says:

    The more crappy neighborhoods (Orange, Maplewood)will probably drop more than the better ones (Millburn, Short Hills). It’s hard to put a dollar figure on it.

  15. Renter says:

    I was looking at West Orange and Somerset County

  16. Richard says:

    njgal, good i’m glad you’re one of the sane ones :) i’m just wondering when the masses finally wake up and say what we’ve been saying here. that is, you want how much for that? high tax areas i think would be the first to crumble. after all taxes never go down. the fringe areas should also feel it first. i do think areas like summit and millburn/short hills will fare better on the downturn but no one will escape the correction.

    if one truly wants to buy and get maximum protection in this market IMO you need to buy in central/west summit, millburn/short hills, chatham, madison or westfield. there’s enough buffer towns to keep out the riff raff so to speak. now the next question is who the heck can afford to buy in these places?

  17. NJGal says:

    One town I was thinking about was Ridgewood – great schools, nice town, nice houses. Considering I always thought of it as one of those buffer towns, inventory is creeping up there as well and prices are being reduced. I don’t think anywhere is safe, although I agree that the fringe areas will be the first to go.

  18. delford says:

    anoymous: It is not just the people that have bought over the last 3 years,it is also all the people that have sucked all of the equity out of their homes.and consumed it. They will be in just as much trouble as the newbie buyers.

  19. Anonymous says:

    NJGal @ 4:26

    It’s elementary … The top 10 reasons are.

    10. There is no shortage of credit.
    9. RE has always grown 15% year over year or real estate prices always go up.
    8. During this period less than 1% of the homes were bought by speculators.
    7. The sudden influx of immigrants after 9/11 has caused a shortage of homes.
    6. Over the last two years all the buildable land in NJ has disappeared.
    5. Flipped houses provide real value.
    4. It is patriotic to always pay more than the list price.
    3. All the 8 million people leaving in NJ travel to NY for work everyday.
    2. NY moved closer to Somerset
    1. Whoever bought those houses are out of their mind?

  20. Anonymous says:

    Hello Richard:

    “Undesirables” please elaborate


  21. Anonymous says:

    Read between the lines…the poor people. You know who they are.

  22. Richard says:

    undesirables ? hmm let me see. does ghetto citizen influx paint a broad enough picture? the other day i saw a crack addict wandering around montrose park, 4 days in a row of after school fights, a hold up outside pathmark on valley street and throw in some police chases and well you get the picture.

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