The Bubble Blame Game

I stumbled across a fascinating article this week, in which a British writer evokes the virtues of falling housing values. On the other side of the pond, however, our attitude is not so chipper, despite what Wauchovia is indicating as a drastic improvement on the housing affordability curve. I would have to admit that it is certainly one way we could avoiding blaming anyone for the present real estate funk. In fact, I might be willing to step forward to claim that it was us Realtors who were responsible for such unheralded affordability!

Allow me to take one step backwards, for the time being. Since there isn't exactly a Franz Ferdinand "moment" for the real estate boom, there is, instead, plentiful blame to spread around. It took place over period of at least 3 years, which is the time frame of appreciation gains that we are presently undoing. It's not a matter of who is at fault, but more so, what could participants have done differently: what would have made a difference?

The basic blame alleged against each profession seems to run along the lines of the following:

Realtors - Bought into the notion of invincibly appreciating home values; encouraged home buyers who were trying to buy beyond their apparent means; some acted as the "glue" in transactions that truly should not have happened.

Mortgage Brokers (the salesperson who brokers an individual loan to a home purchaser)- Many advocated for adjustable, reverse amortizing, interest only, 100%, and other higher risk mortgage products; often "filled in the blank" for Stated amounts [income, asset, job, you name it...] for subprime and Alt-A loan products; coached appraisers as to values; coached clients, and all involved parties, as to what they needed to say, or do, in order to get a deal done.

Appraisers - Valuing properties at contract prices, often well above list prices, and in spite of obvious comparables.

Mortgage Lenders (the institutions originating the mortgages sold to investors)- Often knew full well what mortgage brokers were doing to put together deals; uninterested in rehiring any appraiser who had under-appraised a property; collateralizing made sense, at the time.

The list goes on, surely, but this is only the ones responsible on the professional side of the coin. The consumers, be they real estate investors (i.e. - flippers, developers, speculators), first time buyers, million dollar buyers or even corporate relocation companies, have guilt on their hands as well. And builders is a whole other chapter...

My favorite scapegoat of all, however, is THE GOVERNMENT. Municipalities, in particular, are a fabulous party for ridicule. Did your city or county do anything particularly profitable during the boom? Perhaps something that might have backfired into the drastic drop in revenue at the local level? Or maybe we should thank everyone for such terribly affordable homes.