• Public

  • Public
  • Network
  • Groups
  • Featured
  • Popular
  • People

"The Housing Market Is a Bubble Full of Fraud, and It’s Going To Pop" || by Charles Marohn August 19, 2024 The U.S. is in a massive housing bubble fueled by widespread fraud. With banks incentivized to look away and Wall Street and Washington incentivized to keep housing prices artificially high, a bottom-up approach is the only hope for bringing sanity back to the housing market. Prices are artificially high due primarily to the downstream effects of financialization. Localized supply and demand dynamics are a mess. Decades of money printing & endless bank support have turned the American home into a financial product first & a place of shelter second. Occupancy fraud is where someone states that they plan to live in a home when they apply for a mortgage when, in reality, they are an investor who will never live there. This is fraud because homeowners get preferential loan terms backed by the federal government, while investors pay something closer to a market rate. They can also, therefore, pay more for a home than they otherwise would. When someone commits occupancy fraud, banks & mortgage investors aren’t compensated for the level of risk they are assuming. They are not compensated because the risk is hidden. Investors are more likely to be highly leveraged & more likely to fall into financial distress than regular homeowners. They are also far more likely to strategically default — to walk away from their repayment commitment when market conditions turn downward.