The housing bubble has precipitated a severe, and possibly catastprophic, economic crisis, so I thought it would be useful to put together a list of pundits and experts who were dead-wrong on the housing bubble. They were the enablers, and deserve to be held accountable. People also need to know (or be reminded of) which pundits/experts should never be listened to again. But most importantly, I have time to do this kind of thing now.
The list includes only pundits and (supposed) experts. That means the list doesn't include policymakers such as Alan Greenspan and Ben Bernanke, because however wrong they may have been, policymakers—and especially Fed chairmen—are undeniably constrained in what they can say publicly. I strongly suspect that both Greenspan and Bernanke honestly believed that there was no housing bubble, but alas, we'll never know for sure. The list also doesn't include pundits/experts who were wrong only about the fallout of the collapse of the housing bubble—that is, the extent to which the collapse of the housing bubble would harm the economy.
Many of the names on the list won't shock anyone, I'm sure. And FWIW, a few of the pundits seemed to deny the existence of the housing bubble simply because Paul Krugman argued that there was a housing bubble, and they absolutely hate Krugman. Unfortunately (for our economy), Krugman was right—again.
The list is a work in progress (though I've been reasonably thorough in my research), so feel free to suggest other people who should go on the list. So without further ado, here's the list:
1. Alan Reynolds, Senior Fellow, Cato Institute:
"No Housing Bubble Trouble,"Washington Times (January 8, 2005): "In short, we are asked to worry about something that has never happened for reasons still to be coherently explained. 'Housing bubble' worrywarts have long been hopelessly confused. It would have been financially foolhardy to listen to them in 2002. It still is."2. Kevin Hassett, Director of Economic Policy Studies, American Enterprise Institute:
"Recession Fairy Tales," Townhall (October 5, 2006): "When it comes to homes . . . many people have spent the last four years fretting that the 'housing bubble' might end. That is, they worried that overpriced homes might become more affordable. This is not quite as nonsensical as worrying the price of oil might fall too much, but it's close."
New York Times (July 25, 2004): "Another bubble-skeptic is Kevin Hassett, director of economic policy studies at the American Enterprise Institute and co-author of the fabled 'Dow 36,000,' which was published in 1999 when the Dow Jones index was around 11,000. Mr. Hassett says there is an ideological component to the belief in bubbles. Liberals, who tend to believe that government must step in to protect people from market imperfections, will likely see more of them. Conservatives, who like their markets unfettered, will see less. [EoC: What a classic line. Liberals win again, conservatives lose again—same old, same old.]3. James K. Glassman, Senior Fellow, American Enterprise Institute:
"Mr. Hassett of the conservative American Enterprise Institute thinks housing prices will be pretty much O.K. He acknowledges there might be some bubble dynamics at play in some regions. But he argues that for the most part people are paying more for homes because their incomes are higher and interest rates are lower, reducing the cost to own a home.
"Mr. Hassett expects that rising interest rates would raise this cost and home prices would then decline proportionately. But he sees no reason to expect a catastrophic decline. 'I don't think a catastrophe is very likely,' he says.
"Housing Bubble?," Capitalism Magzine (May 24, 2005): "[W]hile such signs of speculation are troubling, there is little solid evidence that a real estate bubble is puffing up.4. Jude Wanniski, former associate editor of the Wall Street Journal & adviser to President Reagan:
"Even in places where prices are soaring, worries of a bubble could be overblown because higher prices appear grounded in good old fundamentals."
"There is No Housing Bubble!!," The Conservative Voice (August 13, 2005).5. Jerry Bowyer, Author of The Bush Boom:
6. Nicolas P. Restinas, Director, Harvard Joint Center for Housing Studies:
"More Than a Bubble Keeps Housing Prices Sky-High," LA Times (May 20, 2004).7. Jim Cramer, Host of CNBC's "Mad Money" & Co-Founder, TheStreet.com:
"House Beautiful," New York Magazine (December 8, 2003): "Housing bubble? What housing bubble? The signs are in place for a further run-up in real estate. Breathe easy, mortgage holders. There’s still no place like home."8. Christopher Flanagan, Head of ABS Research, J.P. Morgan:
"Housing Outlook," J.P. Morgan Research, June 17, 2005 (no link): "[B]ased on what we know and see in terms of employment and interest rates, it is extremely difficult to see how five years from now we could be looking back and observing a historical 5-year growth rate of, say, less than 5%. That should be more than adequate to support the continued good credit performance of sub-prime mortgage pools.9. Neil Barsky, Alson Capital Partners, LLC:
"It is important to understand — we can contemplate home price growth rates declining, albeit modestly, but we do NOT envision home prices declining!"
"What Housing Bubble?," Wall Street Journal (July 28, 2005): "There is no housing bubble in this country. Our strong housing market is a function of myriad factors with real economic underpinnings: low interest rates, local job growth, the emotional attachment one has for one's home, one's view of one's future earning- power, and parental contributions, all have done their part to contribute to rising home prices.10. Chris Mayer, Professor of Real Estate, Columbia Business School, and Todd Sinai, Professor of Real Estate, Wharton School:
"What we do have is a serious housing shortage and housing affordability crisis."
"Bubble Trouble? Not Likely," Wall Street Journal (September 19, 2005): "For the past several years, Chicken Littles have squawked that the sky -- or the ceiling -- is about to fall on the housing market. And it's tempting to believe them.11. Jonathan McCarthy, Senior Economist, New York Fed, and Richard W. Peach, Vice President, New York Fed:
"Yet basic economic logic suggests that this apparent evidence of a bubble is anything but. Even in the highest-price cities, housing is, at most, slightly more expensive than average."
"Are Home Prices the Next Bubble?," FRBNY Economic Policy Review (December 2004): "Home prices have been rising strongly since the mid-1990s, prompting concerns that a bubble exists in this asset class and that home prices are vulnerable to a collapse that could harm the U.S. economy.12. David Malpass, Chief Economist, Bear Stearns:
"A close analysis of the U.S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is largely attributable to strong market fundamentals: Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates."
"So This is a Weak Economy?," Wall Street Journal (June 28, 2005): "[T]he litany against the U.S. economy is so ingrained and familiar that few disputed this spring's 'slowdown.' When strong data on income, employment, consumption and profits showed 3.5% first-quarter GDP growth and a continuation into the second quarter, the headlines shifted to other attacks -- adjustable-rate mortgages, a housing 'bubble,' the distribution of income -- rather than revising the slowdown story."13. Steve Forbes, CEO, Forbes, Inc.:
Global Leaders Speakers Series (November 10, 2005): "[Forbes] maintained that there was no 'housing bubble' in the U.S. but there was an 'oil bubble' driven by speculators."14. Brian S. Wesbury, Chief Investment Strategist, Claymore Advisors:
"Mr. Greenspan's Cappuccino," Wall Street Journal (May 31, 2005): "These nattering nabobs expect a housing collapse to take down the U.S. economy. But excessive pessimism is unwarranted: Fears of a housing bubble are overblown."15. Noel Sheppard, Economist, Business & Media Institute:
"Media Myths: The Housing Bubble is Bursting,"Business & Media Institute (Nov. 30, 2005): "The increase in real estate values the past five years has not resembled the rapid rise typically seen in a bubble."16. Carl Steidtmann, Chief Economist, Deloitte Research:
"The Housing Bubble Myth," Economist's Corner (July 2005): "When you strip away all of the white noise around a housing bubble, what you find is a robust market for housing that is undergoing several profound changes all of which manifest themselves in higher home price indexes, none of which adds up to a housing price bubble."17. John K. McIlwain, Senior Resident Fellow for Housing, Urban Land Institute:
"No Housing Bubble to Pop," Washington Post (March 2, 2005): "[T]he housing markets will cool as interest rates rise and as affordability declines, but they won't crash. Most markets will flatten for a while or increase at lower, more historical, rates. A few may decline for a year or two. But we won't have a crash."18. Margaret Hwang Smith, Professor of Economics, Pomona College, and Gary Smith, Professor of Economics, Pomona College:
"Bubble, Bubble, Where's the Housing Bubble?," Brookings Papers on Economic Activity (2006): "Our evidence indicates that, even though prices have risen rapidly and some buyers have unrealistic expectations of continuing price increases, the bubble is not, in fact, a bubble in most of these areas in that, under a variety of plausible assumptions, buying a house at current market prices still appears to be an attractive long-term investment."19. Charles Himmelberg, Economist, New York Fed (with Columbia professor Chris Mayer and Wharton professor Todd Sinai—see #10, above):
"Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions," Federal Reserve Bank of New York Staff Reports (September 2005): "As of the end of 2004, our analysis reveals little evidence of a housing bubble. In high appreciation markets like San Francisco, Boston, and New York, current housing prices are not cheap, but our calculations do not reveal large price increases in excess of fundamentals."20. Jim Jubak, Investing Columnist, MSN Money:
"Why There is No Housing Bubble," MSN Money (June 10, 2005): "Housing bubble? What housing bubble? With the 10-year U.S. Treasury bond yielding below 4% and 30-year mortgages available at 5.1%, there isn't a housing bubble."21. James F. Smith, Director, Center for Business Forecasting:
"There is No Housing Bubble in the USA: Housing Activity Will Remain At High Levels in 2005 and Beyond," Business Economics (April 2005): "There is no evidence of a housing 'bubble' in the United States and housing demand should stay strong for years to come."22. Kathryn Jean Lopez, Editor, National Review Online:
"Don't be Myth-Understood," National Review (December 21, 2005): "[T]he so-called housing bubble has yet to pop, and likely won't as long as home ownership remains a tax-advantaged event. Even the New York Times — no parrot of White House talking points — has had to admit that the economy is 'booming.'"23. Samuel Lieber, President, Alpine Woods Capital Investors:
"Housing Bubble? The Market Won't Pop, Experts Predict," Wall Street Journal (April 12, 2006): "We don't see a bubble. Historically, home prices just don't go down nationwide unless we are in a significant recession. The last time home prices fell nationwide was in 1990. It's employment that really counts. The underlying fundamentals of real estate are still very positive. Job creation and household formation drive housing."24. Mark Vitner, Senior Economist, Wachovia:
"There is No Housing Bubble, Says Senior Economist," The Virginia-Pilot (January 19, 2006): "'Everybody is looking for evidence of a housing bubble,' [Vitner] said. 'There is not a housing bubble. The supply had not kept up with demand.'"25. George Karvel, Professor of Real Estate, St. Thomas University:
"Housing bubble?," Minneapolis Star Tribune, October 4, 2005 (via LEXIS): "'There's no housing bubble,' said George Karvel, a professor of real estate at the University of St. Thomas. 'This is a media-induced frenzy. If I wanted to say there is a housing bubble, I'd have Time and Money magazine camped on my door. They've called, and I've told them there's no bubble. Panic sells."26. Glenn Hubbard, Professor of Finance and Economics, Columbia Business School:
"There is absolutely nothing in any market in the country to indicate there'd be any kind of collapse in housing prices,' he said."
Face the Nation (August 21, 2005): I think we do have a great deal of froth in housing markets. There's no doubt about it. I don’t think we're likely to see a large nominal price collapse, that is largely falling house prices, but I think we'll see much slower rates of growth in house prices after 2005.27. Alex Tabarrok, Professor of Economics, George Mason University:
"Was there a Housing Bubble?," Marginal Revolution (Feb. 13, 2008): In the shift to the new equilibrium there was some mild overshooting, especially due to the subprime over expansion, but fundamentally there was no housing bubble [emphasis in the original].28. Larry Kudlow, Host of CNBC’s "The Kudlow Report" & Economics Editor, National Review:
"The Housing Bears Are Wrong Again," National Review Online (June 20, 2005): All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.Special Commercial Real Estate Edition: Casey Mulligan, Professor of Economics, University of Chicago:
"A Commercial Real Estate Crisis? Probably Not," Economix (New York Times Blog) (Feb. 4, 2009): I continue to watch the economy in 2009 but, barring a significant further decline in business activity, I do not expect to see a nationwide surplus of commercial real estate and therefore do not expect to see commercial real estate suffer the kind of crisis that followed from the housing surplus.* * * * *
One close call was Barry Ritholtz, who wrote a column in 2005 with the headline, "Don't Buy the Housing Bubble Propaganda." While the headline would suggest that Ritholtz denied the existence of the housing bubble, it appears to have been more hyperbole than anything. The substance of his argument was that housing values wouldn't fall in value as much as tech stocks did when the dot-com bubble popped (80%). In fact, he outright predicted a significant correction in house prices: "As the rate cycle plays out, prices will slide. I'm looking at a slow asset depreciation of 10%-30% over the next several years as a realistic possibility." Since that's more or less what has happened, it would be difficult to say that Ritholtz was "wrong about the housing bubble." Therefore, Barry does not go on the list.
As I said earlier, this is a work in progress. Let me know if you know of someone else who deserves to be on the list.