Who’s to blame for the cooling market?

By Melissa Wirkus

Pretty much every one in the United States has now recognized that the housing market is cooling off. Even once optimistic real estate and mortgage industry insiders are not denying what the concrete facts and figures are currently revealing.

Now that everyone is pretty much in general agreement about the state of our market, the argument now lies in the question of who or what to blame for the downturn of our market.

When something bad happens, regardless of the situation or context, everyone likes to put the blame on someone else other than themselves. This is exactly what is happening with our housing market, everyone is pointing the finger as to why our market is now crashing after such a successful “boom.”

A September 10, 2006 article by Mary Umberger of The Chicago Tribune, “Housing market may be on ice, but the blame market is red hot,” looks into the various theories of who to blame.

“As the housing boom winds down the finger-pointing is just warming up. Did a long-overheated market simply cool or did it have some help? Where did everybody go? ‘Every time a boom ends, people are similarly puzzled,’ said Yale University economics professor Robert J. Shiller, who forecast the tech-stock crash in his 2000 book ‘Irrational Exuberance’ and began casting doubts about the real estate market in 2003.”

There are countless theories as to what caused the housing bubble and who we should blame. It seems like just about everybody and their mother has something to say about the real estate market and housing bubble, even if they don’t really know all that much about the subjects.

“From Toll to mainstream analysts such as Shiller to 30 or so boisterous blogs devoted to the predicted housing bubble pop, the post-mortem is under way to determine what led the housing market to overheat, possibly to a point of no return.”

“Among the leading suspects: a bubble-obsessed news media; overly cheery housing-industry economists; zealous real estate agents; and bankers offering low mortgage interest rates that carried on too long.”

Lenders are also being blamed for the cooling market because some of their lax lending standards made people eligible for loans and homes they really couldn’t afford. These practices have spawned an increase in foreclosures across the nation, further eroding our already depleting housing market.

Others say it is big home building corporations that have caused the slowdown because they built way too many homes that there was a demand for and further saturated the market.

One thing that is becoming clearer over time is the fact that we are now switching from a seller’s market to a buyer’s market.

“Or maybe, some say, it's housing fatigue: sellers fixated on getting unrealistically high prices and buyers just taking a breather from the binge. ‘There was all this cultural stuff that grew up around real estate,’ said Doug Duncan, chief economist for the Mortgage Bankers Association in Washington. ‘I think there's a sense of emotional exhaustion.’ Without doubt, the market has slowed.”

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