Who Benefited from the Housing Bubble?

[luckis11]

"Banks lost, borrowers lost", then who won?

 

[Pengwuino]

Real estate agents? Construction companies?

Both of which are absolutely dead these days since the bubble popped. The only winners were the people who made their profits and ran (house flippers, realtors, etc)

 

[WhoWee]

"Banks lost, borrowers lost", then who won?

While I understand your point - it's a bit over-simplified.

The banks were bailed out and some of the borrowers put $0 down and walked away - this of course is also an over-simplification - isn't it?

 

[Tosh5457]

The only winners were the people who made their profits and ran (house flippers, realtors, etc)

Yep, a few(compared to the total number of speculators) big speculators. And many banks too, by using CDOs and gaining on commissions. I believe with every bubble comes a redistribution of wealth upwards.

 

[WhoWee]

I would say anyone who was paid the amount they agreed to receive in any transaction involving real estate - can count themselves a winner.

Unfortunately, they turned the lights out before my personal horse crossed the finish line.

 

[luckis11]

I guess the borrowers neither won or lost because it was like paying a rent for as long as they could pay it? Am I correct so far?

 

[WhoWee]

I guess the borrowers neither won or lost because it was like paying a rent for as long as they could pay it? Am I correct so far?

I know of situations where people signed a loan with nothing down, never made a payment and squatted until they were forced to leave - applied for utility assistance and food stamps as well.

I also know of situations where borrowers lied about their incomes to buy a larger house, very little down, struggled to make payments for a few years (couldn't afford furniture - lived only a few rooms) then experienced a loss of income and lost the house and their credit.

 

[turbo]

The CEOs and other high-ranking officials at the banks (even failed ones) raked in huge bonuses, especially when they were able to foist off "triple A securities" backed by garbage onto investors. If you only want to count financial gain as "winning", just follow the money to the dishonest and the unethical.

 

[WhoWee]

The CEOs and other high-ranking officials at the banks (even failed ones) raked in huge bonuses, especially when they were able to foist off "triple A securities" backed by garbage onto investors. If you only want to count financial gain as "winning", just follow the money to the dishonest and the unethical.

Freddie and Fannie execs did pretty well too.
http://www.bostonherald.com/news/politics/view/2011_0526frank_knocked_on_his_fannie_rep_admits_to_helping_lover_land_job_at_mortgage_giant_in_91/srvc=home%26position=0

(oops wrong link)

Here we go...
http://www.bizjournals.com/stlouis/morning_call/2011/04/report-cites-fannie-freddie-exec-pay.html

$35million?

 

[Pengwuino]

I guess the borrowers neither won or lost because it was like paying a rent for as long as they could pay it? Am I correct so far?

To add to what WhoWee said, there were PLENTY of people whose housing value plummeted and their house is now worth a fraction of what their actual mortgage is worth. These people have what are termed 'underwater' mortgages. Many of them simply walk away from their house.

I know of situations where people signed a loan with nothing down, never made a payment and squatted until they were forced to leave - applied for utility assistance and food stamps as well.

I also know of situations where borrowers lied about their incomes to buy a larger house, very little down, struggled to make payments for a few years (couldn't afford furniture - lived only a few rooms) then experienced a loss of income and lost the house and their credit.

Lying about income was a huge problem over here in California. Some brokers/loan officers were also setting up loans where people paid 50% of their income into their mortgage and borrowers didn't care.

 

[WhoWee]

Lying about income was a huge problem over here in California. Some brokers/loan officers were also setting up loans where people paid 50% of their income into their mortgage and borrowers didn't care.

As the illusion became the accepted group's mentality - that the market can only go up - lying could be rationalized because they planned to sell at a profit.

The flip side of that was the brokers knew it didn't matter because they were packaging and selling the loans.

 

[turbo]

A single-earner Christian couple that home-schooled their 3 kids bought our last house, renovate both the bathrooms and then tried to get some shyster to sue my wife and myself because of undisclosed damages. There weren't any undisclosed damages - they just wanted over $8000 for free. I sent a detailed letter to the lawyer showing how the couple had lied, and reminding her that being a lawyer didn't exempt her from laws against extortion. That was the end of that little charade.

Anyway, those devout extortionists couldn't keep up with the mortgage and lost the place to foreclosure. Then the house went right back on the market for 56% of the price that my wife and I got for it. The mortgage company took it in the neck if they didn't unload the paper in time, because the buyers really didn't have the assets to qualify for that loan. A very close friend of mine (who brokered the sale for us) let us in on that.

There was lots of very shady stuff going on to let people "qualify" for loans.

 

[WhoWee]

There was lots of very shady stuff going on to let people "qualify" for loans.

There was a lot of craziness going on before the bubble burst - the sky was the limit and buyers, sellers, builders, and professionals bought into the frenzy wholesale. I produced a cable television show for custom home builders - financed through marketing co-op funds during the height of the boom - and was very close to the "action".

Anytime a market moves as fast and loose and with total disregard for value or price - as the housing market moved - disaster should be expected. The Government promoted home ownership and the mortgage brokers couldn't write loans fast enough to meet the demands from investors.

On the other end, developers competed for land - offering prices for farmland that could not be refused (or justified by a sane person). Tract builders built thousands of houses (farther and farther away from job centers) and commercial developers followed. When the buyers stopped chasing the houses, real estate companies bused people to open houses (yes - I saw it with my own eyes outside of Chicago).

When new home sales hit a plateau, the mortgage brokers went after the re-finance business in places like Cleveland, OH - all of a sudden older people realized that instead of selling their homes - they could borrow 10 times more than they paid and live off the funds (what a deal?). Unfortunately, some of them found out too late a 10 year (variable) interest only loan is NOT GOOD.

When the economy started to slow, there was absolute panic among developers that had rolled untold $Millions back into land acquisitions and options, extensive site prep, (in some cases) hundreds up to thousands of unit inventory - and again out in the middle of no mans land - too far removed from job centers.

Some of the high flyers went down in flames - but most of the builders that purchased land properly and managed inventory (that didn't over-build) are still in business.

 

[imiyakawa]

Mortgage brokers (the actual employees w/ limited liability) who were earning stupid commissions and those firms constructing and selling the original non-conforming retail mortgage backed securities without holding too much of them.

Real estate agents maybe? (as someone above suggested)

 

[russ_watters]

I think people tend to forget that houses are, first and foremost, things you live in. The bubble helped a friend of mine progress from a small condo to a big house by the time he was 30.

 

[Stephen Tashi]

The book "The Big Short" by Michael Lewis documents the biggest monetary winners. They bet against the soundess of the financial instruments that fueled the boom.

 

[Fredrik]

The documentary "Inside Job" covers it pretty well too, for those of us who don't like to read.