Prophecies of Nostradumbass! Who (Other Than Greenspan and Bernanke) Were the Biggest Clods of the Housing Bubble?

Never be wrong when you can be spectacularly, arrogantly, exuberantly wrong. Economics of Contempt rounds up 25 great no-bubble-here quotes from those long-ago days when you weren't allowed to bring fluids on an airplane, America was bogged down in two wars, and Hoobastank's "The Reason" taught us all to love again.

This is a pundit roundup, and many of the culprits are folks you'd expect to see. James K. "Dow 36,000" Glassman (now Mr. Wrong for two millennia!) takes third place for finding "little solid evidence" of a real estate bubble and lots of "good old fundamentals" for soaring prices in the middle of 2005. Jim "Mad Money" Cramer lands in seventh place for a 2003 bet that there would be "a further run-up in real estate." (Which was in fact an accurate prediction.) National Review Online editrix Kathryn Jean Lopez demonstrates the capacity of mid-decade conservatives to overestimate the magical powers of government with this: "[T]he so-called housing bubble has yet to pop, and likely won't as long as home ownership remains a tax-advantaged event." Contemptuous references to "nabobs" and "worrywarts" abound.

What does it all mean? If the lessons of the Iraq war and the preening of the liberal hawks taught us anything, it's that wrongness is not a bug in punditry, it's a feature.

Comments

[Old Mexican]

Never be wrong when you can be spectacularly, arrogantly, exuberantly wrong.

What frightens me is that the very people that were wrong then are saying that the current tax-consumers-in-power are doing the right things to correct the situation.

[Minority Report]

What really ought to frighten you is... YOUR FELLOW AMERICANS VOTED THESE FAGS BACK INTO OFFICE!!!

(I'm looking at YOU, Barney Frank.)

[TP]

I didn't see Art Laffer or Bein Stein on that list.

http://www.youtube.com/watch?v=2I0QN-FYkpw

[Minority Report]

That might be because they changed their minds and started chorusing with Peter Schiff on financial shows.

[TP]

Well then, that certainly absolves them.

[In Time Of War]

The trick to being a successful economic entrail-reader is to state your assumptions loudly and with absolute authority while leaving just enough doubt that later you can claim that wasn't what you meant at all.
And never, ever, under any circumstances, admit you were wrong.

[In Time Of War]

Personally, I've always predicted that any given market will go up, down, or, possibly, stay the same.
Been right 100% of the time.

[John]

Tim,

For these guys it is only a bubble if they can't afford a house. Otherwise, it is sound fundamentals.

I can honestly say I was screaming that housing prices were insane and had to come down since at least 2004. I was told by each and every smart, right thinking person I knew how wrong I was and housing could never be a bad investment.

[Pro Libertate]

Me, too. I kept noting how few in Tampa made enough money to afford houses. "Not sustainable," I said. And they all laughed and laughed.

[John]

And now our taxes are bailing them out of their mortgages. Maybe they were right to laugh.

[joshua corning]

Yup Krugman was right about the fact that government planners caused the housing bubble.

In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.

By the way there is absolutely no political movement to eliminating smart growth and growth management schemes in the "Zoned Zone" so you can expect more housing bubbles in the coming years.

[Johnny Longtorso]

Inflation will take us to Dow 36,000 soon enough.

[John Thacker]

In fairness, quotes from "in the middle of 2005," and earlier (some are 2003 or 2004) are less damning. There was a lot of additional run up in prices in the second half of 2005 and in 2006.

[joshua corning]

As a professional in the real estate business with in a growth management state it was pretty easy to see that there was a Bubble in 2004 and 2005.

I am still in the business and from what i can see all this finger pointing and forgiveness is really going nowhere. We know the housing bubble was caused by government land planning....and we know there is no movement to reform and eliminate land management. So what the fuck is the point?

When i did bring up these things here i was shouted down by Joe and Jennifer and others and got little or no support, and i did all this in 2005 and 2006 and 2007 and 2008 here on a libertarian blog. If you lunatics don't even see the problem what hope is there?

[John Thacker]

As a professional in the real estate business with in a growth management state it was pretty easy to see that there was a Bubble in 2004 and 2005.

I am still in the business and from what i can see all this finger pointing and forgiveness is really going nowhere. We know the housing bubble was caused by government land planning....and we know there is no movement to reform and eliminate land management. So what the fuck is the point?

Because it's popular with enough people. People who already own homes don't want to reform it, they want to re-inflate the bubble.

It was obvious in 2004 that growth management was driving up prices, sure, but less obvious exactly how it would end. You can have growth management just produce higher and higher housing prices for a very long time.

[joshua corning]

It was obvious in 2004 that growth management was driving up prices, sure, but less obvious exactly how it would end.

Bubbles burst. I thought the fact of calling it a bubble implied this. I guess i should be explicit for the future.

!!!UNLESS GROWTH MANAGEMENT SCHEMES ARE REPEALED THERE WILL BE ANOTHER BUBBLE AND IT WILL BURST!!!

Are we clear now?

[robc]

We know the housing bubble was caused by government land planning

You misspelled "Federal Reserve cheap money policy".

[joshua corning]

You misspelled "Federal Reserve cheap money policy".

The cheap money did not seem to cause real estate bubbles in states which do not have growth management regulations.

I am not claiming that the actions of the fed was good. Only stating that the financial crisis and the current recession would not be as nearly as severe as it is.

If the cost of owning a home is affordable to medium incomes then it is affordable. If it is not and the only way to buy a home is in hopes of ever rising prices will allow you purchase it on speculation that its future inflated value due to growth management schemes limiting the supply will offset its costs then we have a problem.

[robc]

Ummm...what lunatics here didnt see the problem? Ive been shouting it since at least 2004. While also pointing out that it was a local problem, as my area had a relatively tiny bubble.

[Jennifer]

As a professional in the real estate business with in a growth management state it was pretty easy to see that there was a Bubble in 2004 and 2005. .... When i did bring up these things here i was shouted down by Joe and Jennifer and others and got little or no support, and i did all this in 2005 and 2006 and 2007 and 2008 here on a libertarian blog. If you lunatics don't even see the problem what hope is there?

Really, Joshua? I remember arguing here that there was a housing bubble, and you were one of the people insisting this was ludicrous.

Here's a couple quotes from just one single thread (spelling and other errors cut-and-pasted from the original). But I don't understand, Joshua, why you argued in 2006 that there was no bubble, if you'd known since 2004 that there was:

http://reason.com/blog/2006/09/01/electoral-gold-texas-tea

joshua corning|9.1.06 @ 3:39PM|
Real estate has utility beyond its monetary value...ie people can always just live in thier over priced homes...which in turn leads to a softer landing then say a stock market bubble...anyway the real estate buble is mostly a regional phenomana...just becouse the areas with over priced homes are disproportiatly represented in the media does not mean all americans are fucked. As much as you might not like it and dispite some over publisised soft spots this is a real economic upturn.

joshua corning|9.1.06 @ 4:36PM
there is far stronger evidence that inflated home prices are a fuction of shrinking housing supply do to over regulation in certian areas then it does with some broad based malfesence within the credit and home loan industry.

joshua corning|9.1.06 @ 5:01PM|
real estate is one of the few investments that the laymen can invest in, over time, without getting completely screwed, can improve without much complication and with recent advancments in credit products can easily be liquified for thier needs in starting a buissness or sending thier kids to collage or even for retirement

[joshua corning]

Umm Jennifer i think you just proved my point.

anyway the real estate buble is mostly a regional phenomana.

there is far stronger evidence that inflated home prices are a fuction of shrinking housing supply do to over regulation in certian areas then it does with some broad based malfesence within the credit and home loan industry.

How is this not a claim of a real estate bubble?

and are you telling me there is a huge sub-prime mortgage problem in Kansas?

Sorry to be the one to break this to you but without the real estate bubble there would be no financial crisis. And that bubble was caused by restrictions in land use.

your incorrectly claimed that there was a real estate bubble caused by sub-prime loans. While I argued correctly there was a real estate bubble due to land use restrictions.

[Boston Cop]

The Krugy shout out was a lil, well didn't tell the whole story.

Krugy was for the bubble before he was against it. (I've heard that somewhere)

[joshua corning]

He flip flopped once the left wing land planners got to him.

But this is a pretty accurate assessment of reality before they did:

http://www.nytimes.com/2005/08/08/opinion/08krugman.html

Basically he did know he was stepping in a mine field of left wing policy when he pointed out land planning causes housing bubbles.

[joshua corning]

*did not know

[Warren]

James K. "Dow 36,000" Glassman (now Mr. Wrong for two millennia!) takes third place...

Jim "Mad Money" Cramer lands in seventh place...

So? Who was the Number One Financial hellaboob? And what collection of fiscal dimwits was he working for?...

Oh.

[Schempf]

David Lereah, former chief economist with the national association for realtors is my number one bubble boy.

[James Ard]

Back in my tennis days in the north Atlanta suburbs in the early aughts I couldn't understand how so many people could afford $500,000+ homes. Apparently I was right, they couldn't. I also don't understand how so many dicks that would lie about a line call in recreational tennis ever earned a salary high enough to think that they could afford it.

[Rich]

Fortunes always hiding,
I've looked everywhere

[bagoh20]

Thing is, everybody loves a bubble until it pops. If you fight the bubble, you don't get none, and when it pops, you still have to pay for what the bubble riders got. Thanks.

[joshua corning]

If you fight the bubble, you don't get none

I fought the political cause and regulations of the bubble and made a bundle...and am now looking at buying more property on the cheap to ride the next bubble. The whole time telling anyone who will listen that growth management is the cause and should be eliminated.

I am not an idiot. I can make money in a free market or a government controlled market.
It is suicide to use a free market business strategy when you know full well that you are operating in a controlled market.

[[e-mail]]

James Glassman spoke and was presented as a model mainstream libertarian pundit when I went to an IHS summer seminar for indoctrination in 1997 - I hope they've revoked his card since then, I found him to be a flack.

[robc]

While the first quote for #1 was bad, I dont see the problem with this one:

When it comes to homes . . . many people have spent the last four years fretting that the 'housing bubble' might end. That is, they worried that overpriced homes might become more affordable. This is not quite as nonsensical as worrying the price of oil might fall too much, but it's close.

[beezle]

how soon we forget Jr. :

"Thanks to being the most productive workforce in America, and I might say, thanks to good policies, this economy is strong and it's getting stronger," Bush told supporters.

Noting that 68 percent of Americans own their own homes, Bush said, "Home sales were the highest ever recently. That's exciting news for the country."

WASHINGTON - Thousands of low-income families will be able to realize the 'American Dream' and purchase their first home because of $161.5 million in funding announced today by Housing and Urban Development Secretary Alphonso Jackson.

"During the Bush Administration, a record number of new homeowners, specifically minority families, have achieved a home of their own," said Jackson. "I encourage Congress to fully support the President's request to continue this important new homeownership tool so even more families can realize their American Dream."

[John C. Randolph]

How can you leave Krugman out of that list? That asshole actually called for a housing bubble as a remedy for the dotcom crash.

-jcr

[Bob Weber]

Glen "Instapundit" Reynolds deserves a medal for his continual "Dude, Where's My Recession" postings, which he made even into 2008.