Customer Reviews

Our Lot: How Real Estate Came to Own Us

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If you are at all curious about how we got to the disaster we currently face in the housing market, this is an excellent overview. It puts the current crisis into a broad context, showing how even well-intentioned changes in housing policy decades in the past created the breeding ground for the housing bubble and accompanying toxic mortgage debt crisis. "Our Lot" is effective both on the macro and micro level - Alyssa Katz handles both complicated policy histories and tragic personal stories of people caught up in the housing bubble with sensitivity and depth. She also raises some fundamental questions about the "American Dream" of home ownership, and whether we need some new dreams. A great work of journalism.

This book is right up there with John Talbot's books in detailing the causes and the effects of the housing bubble on America. It is a "page turner" that names names, and examines in depth the gullibility of Americans who should have known much better, for "get-rich-quick" Ponzi schemes that simply made no sense even if they did have the imprimater of Alan Greenspan and both Republican and Democratic presidents. Perhaps most important, Alyssa Katz shows us why the housing crash will not be going away anytime soon as it's ultimate evil was that it converted us into a nation of debters who voluntarily sold themselves literally into debt/wage slavery and inevitably poverty while enriching a small number of creditors.

I have read many well written books and this tome ranks highly among them. Ms. Katz digs deep into the underlying causes of the current economic morass that our nation is languishing through. She uses many factual accounts to help illustrate the machinations that brought us to this point. As a conservative, conventional homeowner I was mystified by how so many people got into so much trouble through the acquisition of a property. As a 401k/403b holder I was also stupefied by how my investments could tank so hard & so very rapidly. Ms. Katz explains just how this could, and did, happen. Her writing is direct and to the point but flows well and is an easy read for such a technical work. I have to admit to still being somewhat confused, but I fear that is on account of my understanding and not her writing. I only hope that Barney Frank and most of our other legislators take the time to read this work. Well done, Ms. Katz. What is your next challenge?

"Our Lot: How Real Estate Came to Own Us" by Alyssa Katz, a liberal journalist and NYU journalism professor who writes for Mother Jones, is the best book yet on how the sacred cause of "diversity" merged with pedal-to-the-metal capitalism to bring us the Great Mortgage Meltdown.

The book hasn't garnered the attention it deserves -- probably because it makes clear the bipartisan responsibility of both her opponents on the Right and her friends on the Left.

Our Lot focuses equally on the misdeeds of both capitalists and leftists. But I won't give the boiler room boys as much attention in this review because they're a more familiar tale, while Katz's reporting on the role of her side is compelling "testimony against interest".

Katz is remarkably frank about how government programs and political pressure to boost minority homeownership helped blow up the economy. She's particularly good at explicating how leftist housing activists, such as ACORN and Gale Cincotta, the godmother of the Community Reinvestment Act, worked with Democratic politicians such as Bill Clinton, HUD Secretary Henry Cisneros, and Jim Johnson, CEO of Fannie Mae, to lay the groundwork for the Bubble and Bust.

Katz doesn't devote quite as much depth to the Bush Administration's culpability (which, to my mind, is even greater). Perhaps she lacked Republican contacts to give her the kind of inside story she got on her own party's mistakes.

Still, Our Lot makes clear that on housing policy, the Clinton-Bush years form a single continuum with one overarching plan: boost the minority homeownership rate by lowering credit standards. I call it the Era of Multi-Culti Capitalism.

And there's little reason to think that its lessons have been learned yet.

This is a good analysis of how mortgages and home ownership affects and even rules our
lives. But, more than that, it's about how the institution of home ownership and the
market for mortgages has been shaped, for profit, by powerful parties both in private
industry and inside the U.S. government. It's also an account of how we and our lives
have been shaped by those institutions.

The sections on the creation of the subprime loan balloon are astonishing. Katz tell us
what that froth was created from: fabricated information about borrows on loan papers,
appraisers who were willing to give the exaggerated estimates of property values that they
were asked for, attorneys and title agents and banks who signed the papers and pretended
not to notice.

And, so many of the firms involved (mortgage brokers, investment banks, Fannie Mae and
Freddie Mac) made huge profits from these transactions. So, they became addicted to the
volume needed to produce those profits. As long as the money (= credit) flowed, and while
they could package and sell the loans, it did flow, they pursued that volume, even though
doing so required making loans to people who had little likelihood of making the required
payments on those loans.

The sections on Fannie Mae and Freddie Mac give you an appreciation for how much damage
can be done (1) when there is a huge amount of money and (2) when companies with lots of
influence and the U.S. Congress work together. The details are fascinating, and Katz give
lots of them. It shows what happens when, instead of enabling people to earn a decent
living, the U.S. government helps them try to pretend that they are better off by giving
them lots of cheap credit. Basically, the chapter on Fannie Mae is a lesson in how to
create a financial disaster.

I'm from the California central valley, so that chapter about the effects of the real
estate boom and bust on communities around Sacramento like Lincoln and Elk Grove hit home
to me. The local paper today had an article stating that there is an 80% vacancy rate in
industrial property in Elk Grove. There just must have been an incredible amount of over-
building.

There are some crime stories also. Given the huge amount of money that the financial
industry and the U.S. government (through quasi- governmental organizations like Fannie
Mae and Freddie Mac) were making available, it was inevitable that someone would dream up
schemes to use that money in order to launder money and to siphon off fees for
transactions, doing so by "flipping" houses through purchases by fake buyers at inflated
prices. And, the mortgage brokers and real estate appraisers and lending institutions all
when along, because all along the way, they also collected fees.

This book can also be viewed as a specification of what it takes to produce extensive real
estate fraud or to create a financial disaster: (1) Inflated appraisals, demanded by
mortgage brokers, justified by pointing a sale down the street built on another inflated
appraisal. (2) Lenders who are remotely located and did not know the property or its
value. (3) A huge amount of funds available from investors who were desperate for higher
earnings due to prolonged, artificially low interest rates. Imagine dealers (e.g.
mortgage brokers) thinking: we have *got* to figure out how to use that money (and skim
off a fee while we do so). (4) Lenders and investors who are removed from borrowers by
several degrees of separation, and who can unload risk, for example by securitizing and
selling the loans.

Add to this the fact that the real estate lobby and the finance industry lobby are both
huge. And because of that, Katz admits that it is unthinkable that the U.S. government
would set reasonable limits on lending. The bailouts of financial institutions during
this crisis shows that the U.S. government will step in to support lenders, to support
lending, no matter how egregious; and shows that the U.S. government will subsidize
economic activity at any cost. These markets and industries do not correct themselves.
And, the U.S. government will not correct them either. Nor will it do anything or admit
doing anything that slows down economic activity, which would mean less wealth for the
rich and fewer jobs for the rest of us. But, the U.S. government will step in with lots
of money from taxpayers to save the system when it goes off the rails and into the ditch.

From one point of view, given what we know about the U.S. economy, what else would you
expect other than government policies that push and support both home ownership and the
home construction and financing industries. We don't enable those in the middleclass to
earn more, because all that wealth is going to those who are already in the top 2% wealth
bracket. So instead, we'll enable them to believe they are well off by giving them huge
home loans and by enabling them to take all the equity out of their homes (that was
supposed to be their savings, remember) in home equity loans. As Katz suggests, we've
shipped all the other reasonably well paying jobs over-seas. What we've got left is jobs
cutting up chickens and cleaning up hotel rooms (both non-tradable goods) and building
houses (also a non-tradable good, i.e. we can't ship that work to the far East). So, if
we don't protect home construction, we'll have nothing left. We'd better subsidize the
home construction and home marketing and home loan industries, even if it means creating
the kinds of disaster that we just went through and are *still* going through. Sigh. Here
we go again.

On the lighter side, if you visit youtube.com and search for "Bird Fortune subprime
crisis financial adviser" and you'll find very humorous "analysis" of the financial crisis
by John Bird and John Fortune. Yes, we should be mad as hell about what has been done to
the financial system and the economy and especially mad at those who have done it, but
it's good to be able to laugh about it once in a while, too.

Alyssa Katz has done a marvelous job of providing a well researched overview of the real estate industry's contribution (and it is a major one) to the recession we are struggling to recover from. I applaude her for her effort, insight and intellectual rigor. I also recommend that that the Reader begin with the last chapter in that it let's the Reader know the personal drivers that generated the author's interest and passions for her book.

I found myself both nodding in agreement thru the entire book and making notes for future research as I work on my own project.

Throughout these last few years I have taken pride in our creative Wall Streeters. Then Ms. Katz has to ruin it, in "Our Lot." Turns out the current real estate bubble is the product of almost a century of social and financial engineering by the U.S. government, and has happened, though to a lesser extent, at least twice before. This all began during Hoover's day, with liar loans, mortgage securitization, tranching, low/no-down loans, "curb" appraisals, and flipping. Thus, today's outcome cannot surprise anyone who knows their financial history (like Katz), and we can't even credit Wall Street with being creative. Truly, the road to hell is paved, repaved, and repaved - with good intentions (build stronger families and more pleasant communities, boost the economy, help minorities).

Actually, this crisis did bring about two innovations, per Katz. We went from building homes for a lifetime, to building only to resell within 5 years (much cheaper and faster). And, we found lots of overseas "investors" (suckers) to participate.

So, file this (the experiences, not the book) all under "Lessons Unlearned." And I'm still proud of Wall Street - home of Bernard Madoff, Citibank, AIG, Lehman Brothers, short-term thinking, CDOs, and expert bond-rating firms!

The mortgage-led decline of the American economy has been ample fodder for books on the topic; perhaps the only bright sign in an otherwise dim economy. "Our Lot" is an attempt to explain one of the many causes for the mortgage-led real estate bubble, particularly focusing on Clinton Administration era efforts to increase the percentage of home ownership rates. Katz focuses on the consequences of these efforts, but at times it's difficult to tell what part of the political spectrum she is coming from. Clearly "Our Lot" is not a polemic, but a dissection of how the real estate bubble came to be created (albeit in part), how the bubble grew (again, in part) and how it came to burst (again, only in part). While Katz indeed does a vast amount of research and interviews, she is only focusing on a narrow segment of the real estate boom; those individuals who secured mortgage loans that were wholly inappropriate for them. While she does also include the flippers, schemers, and various lowlifes that populated the real estate boom she's only focusing on the narrow microeconomic aspects of the real estate boom and not the larger macroeconomic aspects of the boom that truly doomed and crippled the economy, such as the derivatives markets, mortgage backed securities and so on.

It is easy to identify with the unfortunate souls Katz chronicles and the difficulties they've faced, and to question the wisdom of Clinton-era concepts for increasing the percentage of homeownership, but the problem is that Katz lacks a central thesis or argument. Yes, what happened is terrible and it shouldn't happen again and government is partly responsible, but aren't the people who took these loans also partly responsible? Wasn't the repackaging of these loans and the resultant collapse in the markets for them equally reprehensible? What of the massive buildup in housing stock far beyond the ability to absorb the capacity a horrendous waste of resources (as chronicled in The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream)? Ultimately "Our Lot" is wholly unsatisfying regardless of your political beliefs; it's hardly a damning condemnation of Clinton-era policies that led us here, it isn't satisfying for social conservatives who feel the borrowers are equally to blame, and it instead turns into an unsatisfying whine-fest about how awful it all is with no call to action. There are undoubtedly better books out there on the subject of the whole mortgage loan led economic fiasco that are told with better clarity and sense of purpose. On the whole that's what is lacking here; Katz tells a compelling story that is truly captivating and by turns sad and tragic, but there is absolutely no sense of purpose.