Dr. Housing Bubble 12/07/09

[Crewleader]

Nothing Down Flamed the California Real Estate Bonfire: 40 Percent of First Time Buyers in 2006 and 2007 went with Zero Down in California. 4 out of 10 Purchases in California now Backed by Almost Nothing Down FHA Insured Loans.

There are many reasons why this housing bubble reached epic proportions. One reason was Wall Street came unhinged and securitized anything with a signature whether legitimate or not. Another reason involved a society slowly desensitized to the devastating power of leverage. Throw in a mix of get rich quick religion and it is no surprise why this bubble expanded to such gigantic proportions. It also helps to explain how institutions and banks ever thought it to be a smart idea to make option ARMs and Alt-A loans. This is one easy aspect we should all be able to agree upon. The no money down idea was shifted from the seedy late night infomercial crowd and became common place. We are hearing many ideas being thrown around on Wall Street and D.C. but no one will dare touch the notion that we should increase the down payment option.

I believe a big part of the housing bubble fuel was the ability for people to purchase homes with little to no money. In California, this was the accelerant that created the biggest housing bubble we have ever witnessed. For the lower end of the market you had subprime loans and for the mid to upper tier you had the Alt-A and option ARM products. There was a reason for a down payment. In this article we are going to try to trace the genesis of nothing down in California.


Some have been in the housing bubble world so long that they forget that nothing down used to be a rare occurrence. I tracked down data for the decade to put a start on this nothing down craze for California. 2007 was the last major year of nothing down but the FHA has stepped in with “almost nothing down” and is now dangerously pumping out loans to fill the market void. The giant leap in FHA insured defaults merely reflects this horrible practice. Let us first look at the California data:

http://www.doctorhousingbubble.com/nothing-down-flamed-the-california-real-estate-bonfire-40-percent-of-first-time-buyers-in-2006-and-2007-went-with-zero-down-in-california-4-out-of-10-purchases-in-california-now-backed-by-almost-n/

[Double T]

1. So let's see if I've got this right........

We're going to get out of our housing and financial trouble by repeating the very behavior and policies that destroyed US in the first place. No wonder BO and Company are dragging their feet on reform of our financial institutions. Maybe I'll get lucky and aliens will abduct me and take me away from this crazy, insane. loony planet.

[Crewleader]

2. So let's see if I've got this right........

We're going to get out of our housing and financial trouble by repeating the very behavior and policies that destroyed US in the first place.

Go To The Head Of The Class Double T! :applause: