The Housing Boom and Bust by Dr. Thomas Sowell. Dr. Sowell published this book last year as response to the housing boom/bust and the resulting political and economic fallout. He’s discussed it in various columns, but this is a central place for him to discuss the issues.

The book isn’t long, under 200 pages. I would probably refer to it as a long formal essay. The book is well-referenced. Noe that the books pulls no punches and is not just a rant against Democrats or political leftists. Dr. Sowell points the blame where he sees it belongs, and those in the spotlight are certainly Republicans at times.

Here is how Dr. Sowell describes the book in the preface, I certainly could do no better:

“There was no single dramatic event that set this off, the way the assassination of the Archduke Ferdinand set off the chain of events that led to the First World War or the way the arrest of political operatives committing burglary at the Watergate Hotel led to the resignation of President Richard Nixon. A whole series of very questionable decisions by many people, in many places, over a period of years, built up the pressures that led to a sudden collapse of the housing market and of financial institutions that began  to fall like dominoes as a result of investing in securities based on housing prices. This book is designed to unravel the tangled threads of that story.“

Also very much worth checking out is the recent paper on the same topic from Dr. Russell Roberts of GMU: Gambling with Other People’s Money – Mercatus, and the summary from Tyler Cowen.

Sowell lists the following as actors and more correctly malefactors in this story (not exhaustive & in no particular order): Fannie/Freddie, Congressmen & Senators in genera, George W. Bush, B. Obama, the CRA, ACORN, HUD, Federal Reserve, and the ratings agencies like Moody’s and S&P.

Here are some points worth noting:
1. From 200-2005, the median sale price of American single-family homes rose by one-third, from $143, 600 to $219,600. And rose much more sharply in some areas. p. 1
2. As a GSE Fannie/Freddie hadthe implicit backing of the U.S. government. pp. 4-5
3. The quest for the charming-sounding “affordable housing” and “open space” are behind a great deal of the problem. p. 9, 12

4. At one point a house that cost $155,000 in Houston would cost more than a million dollars in San Jose. p. 15
5. Less than 10% of the land area of the U.S. has been developed. Trees alone cover more than six times the area of all cities and towns in the country combined. p. 17
6. Concealing or shifting housing costs onto others, is not the same thing as lowering housing costs. p. 35

7. The CRA (Community Reinvestment Act) was at least a notable player in this problem, if not a major player. p. 36
8. Barney Frank’s fingerprints are all over this debacle, and he was not apologetic or contrite afterward either, but rather more indignant and in defiance of the facts. pp. 48-49
9. Congresspeople Chris Dodd, Nancy Pelosi, Charlie Rangel and Maxine Waters are also guilty of helping the boom and eventual bust. pp. 50-52

10. The hand-wringing of the political class over the rapid decline in housing prices during/after the bust is a bit puzzling. These same people had the goal of affordable housing, declinging housing prices gave us that. But instead of being overjoyed, the politicians did everything in their power to re-inflate the boom and avoid a bust. p. 78

11. How much is a trillion dollars? A trillion seconds ago on this planet the Chinese dynasties and the Roman Empire had not yet come into being. None of the founders of Christianity, Islam, or even Judaism had been born. p. 82
12. Asians are consistently given loans at higher rates than whites. Is this evidence of bankers’ discrimination against whites? pp. 97-101, 103

The final chapter is a look at what’s being done and how it might affect the future. This book is a solid piece of work and easy to get through. I would also again recommend the paper from Dr. Russ Roberts as a solid complement. Don’t miss some of the wonderful video interviews below with Dr. Sowell on this topic.


Additional links:
The Housing Boom and Bust at Amazon
The Housing Boom and Bust: Revised Edition in Paperback
Walter E. Williams : The Housing Boom and Bust
FORA.tv – Thomas Sowell: The Housing Boom and Bust
The Housing Boom and Bust – Reason Magazine
Housing Boom and Bust – Thomas Sowell – NRO
The housing boom and bust By Thomas Sowell

From Dr. Russ Roberts:
Gambling with Other People’s Money – Dr. Russ Roberts
Marginal Revolution: Russ Roberts on the financial crisis