Customer Reviews

Sell Now!: The End of the Housing Bubble

5 star:		(10)
4 star:		(4)
3 star:		(1)
2 star:		(3)
1 star:		(2)

 

 

About a year ago, I read Talbott's first book, "The Coming Crash in the Housing Market." At the time, I agreed with the premise but felt that the author had failed to marshal sufficient support for his claims.

This book is much better. Talbott starts out by quickly demolishing arguments that real estate will always increase in price. Talbott not only explains why the housing bubble is about to burst in many areas, he describes the nationwide and international ramifications of that crash. Although Talbott builds on work done by Robert Shiller (who determined that real housing prices have been increasing only since 1997), Talbott advances the research by considering the tax benefit received by homeowners as an independent asset. Once that tax benefit has been factored into the equation, Talbott finds that housing prices have risen, in real terms, since 1981, when nominal interest rates began their descent. Talbott demonstrates (persuasively, in my opinion) that a major reason for the bubble was banking practices that enable buyers to borrow more when nominal, but not real, interest rates are low. Because nominal rates are low when inflation is low, however, new buyers have a harder time "growing their way out" of a large mortgage.

This could have been a five-star book. Talbott's analysis of the real estate market is spot on. I only deducted a star because of the existence of Chapter 4, entitled "Can You Say 'Conspiracy'?". In the middle of cogently explaining the housing crisis, Talbott veered off course to write a chapter about the Federal Reserve, the FDIC and Alan Greenspan. I am not convinced that there is any "conspiracy" here, or that the one statement about ARMs made by Greenspan is evidence of malevolent intent. A fuller discussion of the Federal Reserve's actions in the early 2000s would take into account its attempt to prevent the dot.com implosion for wrecking the entire economy. Although Talbott acknowledges this fact, Talbott does not persuasively counter it. This chapter is, alas, in line with Talbott's own political orientation, as he jabs the "Bush" tax cut and those "status-seekers" who buy large houses.

Fine, if you agree with Talbott. For the rest of us, the politics are just noisy intrusions in an otherwise well-reasoned, compelling book. Highly recommended.

Talbott, like the other scholars/economists at the UCLA Anderson School of Management, has got it right! Unlike the housing cheerleaders at the NAR, Talbott gives straight talk about the origins of the housing bubble, and the 8 myths for permanently high housing prices. He explains that the real culprits of the bubble were overly aggressive banks. As of this writing, every day I read something about the FDIC trying to rein in these agressive banks, and how people are getting foreclosed on because they cannot pay their adjustable rate mortgage as the interest rate has gone up. Talbott predicted all of this.

He devotes an entire chapter to the Greenspan conspiracy. Why did our smartest and lead banker, Alan Greenspan, tell the American public in late 2004, to get adjustable rate mortgages? He knew people would have trouble paying as interest rates climbed. I knew it too, so I avoided it although I would have saved a bundle initially on the payments. Talbott explains that Greenspan was helping out the banks, and preventing a recession after the dotcom collapse, without worrying too much about the more painful consequences he was creating by later foreclosures and bank collapses from declining real estate.

He explains from an economist view why houses are overvalued in our most expensive cities in the US and the world, draws comparisons to Japan whose housing market is declining for the 18th year!, compares us selling houses to each other to a Ponzi scheme, and asks people to evaluate if they are in trouble too. He devotes some pages to the effects of a housing bubble bust on the economy, and the recession that will rise over the entire country, since the majority of new jobs have been created in real estate: lenders, realtors, construction, and retailers/remodelers/car and boat stores who profited as consumer spent their home equity.

Talbott makes some other interesting observations that I had not read anywhere else. I am rereading it the second time, and underlining as I go along. I would be delighted to meet Mr. Talbott, so I could ask him more questions about the economy, and the role of the housing bubble collapse on our economy.

Straight talk! That's what you'll get from this book. He'll go down in history as one of the only economists who foresaw the effects of the housing bubble. I recommend anyone who owns real estate or is thinking of buying, to read this first!!

This book mainly argues that the price of real estate has become de-coupled from the "fundamentals" (rental values, income) worldwide, resulting in a bubble that will burst. It also argues that this has been caused and pushed by Alan Greenspan at the Fed. (he lowered interest rates to cause the housing sector to get pumped up, mainly to cause a "soft landing" for the economy right after the dot.com stock market bubble burst). And it argues that non-market forces, such as aggressive lending by banks and mortgage brokers, as well as status-seeking has caused the bubble. All this with a background of a federal government that is not overseeing lending and banking the way it should (as was the case in the 1980s with the savings and loans debacle, and in the 1990s with Enron). In short, Talbott accuses Bush of being "in bed" with the banking industry, and being more a propoent of the banking industry, instead of being a proponent of the average working family. His analysis is brilliant and wideranging, and he does not stop at economics, but questions the American obsession with "image over substance" (highly-leveraged people buying villas and mansions way beyond their means, financed by increasingly complex "jumbo mortgages").

The bubble is here, and when it bursts, it will take the world economy down with it. The Economist has already predicted this, and they also predicted the 2000 stock market bubble bursting. The first signs of it are now appearing in Britain, Australia, and Ireland (not to mention Japan, which has had 18 years in a row of falling real estate prices).

This is a good book and I'm in agreement of the general direction our housing market is going.

There's a lot of misinformation in the review below.

1. The Bush Administration nor the Federal government directly control the printing of the dollar. This responsibility is done by the Federal Reserve, which contrary to it's name, is not part of the Federal government. The Reserve lends money to the US Government and is paid back with interest.

2. The sea is rising twice the rate today as it did in 1996, but the current rate is still a relatively slow 1/10 of an inch per year.

3. Most of the displaced New Orleans population are very poor. They do not have the economic capability to increase housing prices. Including housing lost in Katrina, today's housing market are still over saturated and over supplied.

4. The property value used for calculating taxes is different than market value. For instance, my parents home in Queens, NY is worth $650k, but the city's tax appraisal assessment is about $200k. The city listed $650k as the market value.

5. Although China compete for resources such as steel and oil, the increase in cost are largely contributed by the higher domestic demand caused by the housing boom or bubble if you will. I doubt China get much of its lumber from the United States.

I was amazed by this book. Not because of the facts that he proposes within. But the facts that he got right since it's now August and everything he says that would happen at this point (back in January) has. The chickens are coming home to roost folks!

The only reason I bought this book was because I saw his previous book and how he was doubted about the coming bubble. Now everyone finds themselve in the midst of this bubble. The book is very informative and is real keeper and you will be more wealthy for the knowledge gained.

Beneficially sobering for anyone considering a house purchase, or for a heads up on a crisis that may very well affect us all! More a concerned warning than an investment plan, the author does a good job explaining the multiplicity of root causes for our current housing predicament. Good news for families unable to afford the current overall ridiculous pricing of housing, bad if you've already bought in.

As a Florida west coast realtor and real estate investor; I was desperately seeking an explanation to the incredible drop in buyer's demand in our real estate market, which began in the fall of 2005. John Talbott's book is one of several that I bought in the spring of 2006 on the subject. He was a lone voice, one of doom, that I did not want to believe was true. It turns out he was right in his concerns. I had seen some mortgage fraud in 2004 and 2005, which I spent hours trying to find some government entity to investigate, without success i am sorry to say. I had no idea of the magnitude of this fraud. The mortgage fraud is not talked about much, but I am convinced it was a major player in the greed, corruption and downfall of our current financial system. I am interested in whatever John Talbott has to say.

This book is published in 2006, with some revision of the author's the other book in the same topic. This book is a great one with a lot of data to analyze the biggest real estate bubble existing internationally, not just U.S, but U.K, Australia, and Europe.

The book writing style is more academic, not as easy to read as your novel, but each chapter inside is detailed with a lot of statistical data. Rather than picking up U.S. Real estate data, the author include international RE data to argue the fact that we are in the bubble of international RE.

As I am writing the review in May 2008, U.S. are in the abyss of subprime mortgage, and the worst recession in 28 years (quoting Warren Buffet's words). We now see the author's viewpoints are sound.

History repeats itself. common sense does make sense. When P/E is high (no matter if it is a stock or a home), you need to research, think and act. Always, always be cautious and use data to support your research. Do not follow the herd, do not listen to these so-called experts from Realtors (to them it is always great time to buy! ) and you hard-earn money will be safe.

Today is September 19, 2008, the day after the World Banks stepped in and the Feds gathered to try and fix what John Talbott and others like him warned. As I read this book it was funny because it was happening real-time. I was watching CNN and reading it at the same time - weird. I read this step-by-step fallout book during the same week that we were all interrupted by continual breaking news from CNN to indicate that bank after bank and even AIG were dropping like flys. If you are reading this John, I hope that you will consider a book about the Wimpy Factor, 'two hamburgers tomorrow for one today' - how a large percentage of our paychecks are forfeited to thin air in hopes of protection tomorrow by insurance companies. We will never see that money again and we could never make that percentage gain on any investment. How can we justify money and jobs going out but not returning to the economy?
Best regards,
Brenda Economides
Pasadena, CA