"The Housing Boom and Bust"

"The Housing Boom and Bust" is Dr. Thomas Sowell's latest writing in economics. Dr. Thomas Sowell is probably one of the best economic/societal writers in our time period. He became famous for his book "Basic Economics" which is in its third edition.

This book, while short is very to the point on looking at the conditions of what caused our still growing housing problems and its systemic spread to the other economic activities. What struck me at first was the book was only 148 pages long, but had an additional 28 pages of "Sources" that were easily broke down for easy research to back up his writings.

The book was broken down into 5 Chapters....

1. The Economics of the Housing Boom
2. The Politics of the Housing Boom
3. The Housing Bust
4. Housing Mystiques and Housing Mistakes
5. The Past and the Future

- From 200-2005 American single family home prices by 1/3 ($143k-$219K). New York saw a rise of 79% and Los Angeles/San Diego saw 110%/127% rise.

- Economic study of California's massive rise in housing prices due to "Open Space" laws and "protecting the environment" regulation. These policies started in the 1970's dramatically turned affordable land into expensive investments that did not correlate with peoples incomes throughout the years.

- Debunks the "land use restriction" philosophy of saving land because it assumed we are over developed as a nation. The reality is that only 10% of America's land has been developed.

- Shows the "creative financing" by lending institutions. 2002, 10% of loans in America were interest only loans. By 2005, 31% of loans were interest only. Higher in other areas of the nation.

- Detailed writing on the Community Reinvestment Act, HUD and Fannie/Freddie and their roles by politicians that effected housing loans. Showed quotas government used to back mortgages in their quest for "Affordable Housing".

- Presents a whole chapter with economic data during the housing bust. Data such as: Lending done under the Community Reinvestment Act criteria constituted 7% of total mortgage lending by Bank of America. These 7% of mortgage loans constituted 29% of its losses on mortgages.

- Shows factual data that debunks the charges of "Racism" and "Societal Injustice" being used to justify loans through government programs throughout the decades. Breaks down the now famous 1991 study by the Federal Reserve system and how the statistical data was misused by politicans and "social justice" groups to force lending institutions into bad lending practices.

- Confronts the racism charge of "60% denial rate of mortgage loans from whites to nonwhites". This was a 1992 study done of the Boston area by the Federal Reserve. The denial rates for loans were actually 17% for non-whites and 11% for whites. The difference is only 6% but media/politicians used the phrase "roughly 60 percent more likely to be turned down than whites." Many studies of race do not show Asians being in the "non-white" section. Asians have a lower denial rate for lending purposes then all races in America. Many groups do not state that in their cause for "social justice".

- Devotes many examples of economists warning America of its "housing bubble" before it began. Many economists were warning of government intervention programs/banking programs that propped up a false housing market. Many warnings were not listened too by investors and people working in the housing markets.

- The last chapter puts much perspective into our socities every growing lack of understanding of finanical futures by not understanding past mistakes.