July 12, 2007

Housing Voyeurism: What Kind of Housing Personality are You?

Housing has become a national obsession. As a kid you were told not to talk politics at the dinner table or ask a person how much money they make. Yet you still had that curiosity. Today there is no need to ask because you can go to Zillow and find out how much they paid for their 2,000 square foot 4 bedroom home. So they say they have a pool eh? We can go on Google Maps and zoom into their backyard via satellite imagery to verify this claim. “So it was an above ground pool Bob was talking about!” And if you turn on the tube, you find the following television shows:

Extreme Home Make Over

Flip That House

Property Ladder

Sell That House

National Open House

Secrets that Sell

Designed to Sell

Bought and Sold

Million Dollar Listing

These shows appear on Bravo, A&E, HGTV, and your regular network stations. The point is, we are incredibly saturated with media marketing real estate. And do you notice a key phrase and underlying message in many of the shows above? Sell your house! Buy a home! If we are to combine a hybrid of the messages above we get something like “extreme flipping that will design to sell your house for a million dollar listing!” I think I’m on to something here. No longer is housing a place to live and raise a family in modesty, but housing is now an investment to propel you into the next dimension of uber-wealth. In reality, the amount of traffic online regarding real estate is unbelievable therefore indicating a wide demand for housing information. Not only that, here in California we have, according to the Department of Real Estate, 534,266 licensed brokers and salespeople. With 12,200,082 housing units in California that gives us one agent or broker for each 22 homes. Maybe we have an agent and broker bubble?

Either way, housing is becoming a massively important part of our culture and economy. Looking at recent employment data, for the past seven years real estate related employment has been attributed to impact 29% of all added jobs. And consumption is so important, accounting for 70 percent of our GDP, without housing we might as well forget the $5 trillion in pseudo bubble housing wealth and we’d be in a recession as we speak. But looking at the psychology of housing, we begin to see in the theatre of life many characters emerge. Since we have the tools to literally piece together every facet of a neighborhood and play amateur James Bond, we can find tons of information regarding our environment. So let us look at the housing personalities emerging in this housing bubble masterpiece performance.

The Five Housing Personalities

1. The Perma Bull Housing Sales Person

This person has never seen a house he wouldn’t sell (or buy). It all depends on the weather and the global positioning of the Earth. These folks have tattooed on their right bicep, “10% appreciation 4 life!” and show it off with glee. Folks that fall into this category are people like David Lereah, former chief economist of the NAR. His ability to spin would put the Harlem Globe Trotters to shame. He reminds us of Iraqi Information Minister Muhammed Saeed al-Sahaf. "We have them surrounded in their tanks" as US tanks rolled into Baghdad. You got to hand it to these folks, they have the ability to say absurd things in the light of mounting disaster. Either way, this personality will always see real estate as the absolute best investment ever. Even if the land is over Chernobyl they’ll tell you that spent uranium is good for brain development or that soon, you’ll be able to flip the property as a national treasure.

God forbid you give these people any facts or historical background. If you do, be prepared for a cadre of verbal assaults. They’ll call you a tinfoil hat wearing bitter renter. Or they will claim that the statistics you pulled out are fraudulent like the Nigerian documents CBS received. They’ll claim that the only truth is that of their all mighty association. Anything diverging from these talking points is tantamount to treason. They offer you a guarantee of appreciation. They’ll use the typical 7 to 10 percent annual appreciate rate; it all depends on what the central pundit hub is dishing out. A formidable foe no doubt.

2. The Perma Bear Housing Naysayer

The antithesis to the housing perma bull sales person. These folks are masters of dark and dreary statistics. For every argument a perma bull has, they have an equally convincing argument that claims otherwise. They are ready to do battle from experience either from losing money in certain deals (normally initiated by perma bull rhetoric) and suddenly are sworn warriors to the cause of outing the perma bulls. “Housing appreciation is 10 percent year over year” the housing bulls will say. Oh really? “What about the fact that 100 years of data show housing trending at a slow pace only keeping up with inflation?” Touché.

Their argument is valid and has merit in economic reality. However, in a bubble world they are throwing pebbles into the ocean. They will argue that inflation is cooked by government agencies trying to hide the real cost of living and seeing it as an invisible tax on the people. They will also claim that incomes do not support current market housing rates. Since 70 percent of the US population owns a home, there are less housing perma bears out there simply because of the law of self preservation and self interest. Either way, an equal challenger to the perma bull.

3. Apocalypse Now

A fiery asteroid will hit Earth and burn us to a crisp and then we will see 110 percent price decreases. After the 10 million people that survive the impact, you’ll see amazing deals hitting the market. These folks have a strong case of schadenfreude, that is taking pleasure in others misfortune. Normally many are angry and will throw it in your face that your 10 percent appreciation won’t matter after we collide with intergalactic space rocks. It’s an interesting personality to observe. They usually want to see housing explode and wouldn’t mind seeing a 2nd depression shake up the world. The psychology behind this is rather fascinating. Whether they have the “moth going to light” syndrome I do not know, but one fact is certain and they want destruction and they are geared up for it.

These folks see housing overpriced by 90 percent. Forget using any income to rent to price ratios, housing will go down to Chinatown no matter what. 10 percent annual appreciation? Not in this world. Some of these folks have all their cash buried in the back yard. Great source for screenwriting a Hollywood script.

4. The Housing is in a Bubble? Person

These folks are your paycheck to paycheck people. They are the folks that signed for a $400,000 loan and forgot to ask if they just got a 30 year fixed or interest only adjustable mortgage. Oh well, unfortunately they’ll get the wake up call on a future mortgage payment in 1 to 2 years. These people really don’t care about a housing bubble. They were at home, watching one of the above mentioned housing shows and somehow subliminally, they learned that 10 percent appreciation always happens. So when Joe the agent showed them how to get into a 3/2 home for $500,000 on an exotic loan, they figured “what the heck!” This personality is a mixture of not really having time or initiative to care about the basic economics of the housing market. They are like a reed in the wind. They are more concerned about making the car, gas, electric, health, food, and other basic bills of life to dig into economic theory.

These folks are usually people who will have $3,000 in a savings account earning 2 percent while carrying a balance of $3,000 on a credit card at 29 percent simultaneously. Many of these folks will be burned once rates resets or they need to sell their home for various reasons.

5. The Hybrid Housing/Bubble Head

This is where the large majority of the population is. They see the value of owning a home. They realize that rent is really not a viable option for the entirety of life but they also understand that a home can be overpriced. It is a challenge for these folks because to a certain extent, they believe in the perma bull argument that housing is a great investment. Yet they also have the gut feeling of many perma bears that housing, after crunching the numbers, is overpriced. They normally don’t think that the world will end but realize prices will come down and in certain areas, significantly. These people normally understand some basics of finance; the major point they get is spend less than you earn. They also try to live within their means, have an emergency savings account, and want to have a safe neighborhood with good schools for their family. Many times, they fight the urge to move to a questionable neighborhood because family safety is more important than homeownership.


Most people interested in housing fall within a few of these personality categories. Imagine that all these personalities have gradients attached to them; some people are on the extreme ends of the gradients but the majority falls within the middle. They exhibit hybrid views on the housing market. What is your housing personality?

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igotabooboo2 said...

Dr. HB,
Love your site and read it everyday.
I fall into the last category because a)own my own home with a fixed mortgage and 10 years remaining, b)am in the real estate industry since 1992 and remember what it was like to have someone hand over the keys to their home and just walk away. I have been telling friends and family that this decline will be big and slow; but they pooh-pooh me. My sister says the decline happens elsewhere but never in her high-end, by the ocean neighborhood. She thinks that price reductions will never come to the South Bay (Los Angeles) due to location. I also have a best friend who is about to spend $1.5 million right now on a tear-down in Pacific Palisades and she will not listen to me tell her not to do it. Frustrating that she and her husband will possibly be losing all their equity over the next 2-3 years. They think I am an alarmist.

speedingpullet said...

I'd guess I'm number 5 too, but every once in a while I like to don my tinfoil bonnet and make like I'm a #2 - who's for raising Nubian Pygmy Goats and knitting your own muesli?....etc. Being an optimist, it doesn't last long, but its fun nonethless

BooBooTwo - I hear exactly the same kinds of things from my friends.
Most of the people I know who have bought, have either bought recently (in the last 2 years) or are facing the Sword of Damocles over whether to sell or rent out their other houses in San Diego, Florida and the like.

Its a different kettle of fish altogether ripping the stuffing out of FBs you read about - i know i've been guilty of it on occasion - but when its close friends and family, there's really not much you can do, other than sit and listen. I gave up about 1 year ago telling people what I think is going to happen... people you know get fed up with it, and its not worth getting into an argument about it.

Personally, I've given up on even looking in PacPal - perfectly modest houses are still listed with an asking price that would stun some of the uber-rich in Malibu. Buying a $1.5 million tear down is the height of insanity - but....she's your friend. Offering a few nights on your sofa and a hot meal, after the inevitable BK, is pretty much all you can do.
I don't suppose showing her listings for much nicer properties, for the same price, (which they can move into immediately,) over the hill in Sherman Oaks, Encino or even Topanga, has any effect?

Good luck and courage mon brave

I'd also like to cheer on Dr HB - you consistently make me laugh, and think, all at the same time (and without my head exploding).

Peppermint Hippo said...

There's probably another category I've encountered traveling abroad and it's the "WTF is going on with housing in America?" camp. When the market was on a tear and appreciating double digits, these folks were dumbfounded (and maybe a little envious they couldn't partake). Now that the housing market is in a slow-motion freefall, they are saying that the boom and bust is another example of American excess consumerism and failed leadership and policy. It's interesting that people spot bubbles outside of their own country before they can identify one in their own country. Because housing has a huge emotional element, I think many people deluded themselves into thinking they were making a great investment, when in fact, they were swayed by the granite countertops and 5 car garages.

Dr Housing Bubble said...


People find it hard to believe that you can own real estate and also feel that housing prices are too high. When you tell folks this, they have a glazed looked of cognitive dissonance. Somehow if you think housing will go down, you either don't own or are a bitter renter. If the perception is housing is expensive, it will go down in many areas. Hey, rich people use mortgages too and higher rates impact them as well.


You have to laugh at how absurd prices are. When people try to justify the current market, it sounds like a mother defending her locked up son for selling drugs. Of course she'll say good things about him. She's biased!

I'm in your same boat. I only give advice to family members if they ask. They'll tell me, "hey, did you hear Mike is making 10k a month by being a broker? Real estate is hot." That was last year. Now, they have a hard time understanding why Mike left his current company. "Well, let me tell you about the mortgage backed securities market imploding on itself as federal rates and mortgage fraud..." For one, they would zone out if I talked like this. Second, I have to put it into practical terms otherwise I might as well rant in Latin.

C'est la vie.

peppermint hippo,

Sometimes you have to be outside of the insanity to regain it. I'm reminded of a show that had this family with everything. The perfect house, car, family, everything right. Well, as this person walks out of their home, every other family has a better car, a better home, and a better family. All of a sudden, this person's happiness turns into envy. The Joneses got more dough and always will...

This bubble was fueled by human nature and greed. Economic fundamentals were a collateral byproduct of everything that remained.

ecoshift said...

count me in the wtf crowd. though i live in CA.

i actually own property i bought in the early seventies. and i kept it.

it's hard to believe what it is worth today. makes no sense. no one around here who works for a living can afford to buy in any more. my brother and his wife are both teachers. they live in a mobile home park.

meanwhile development is changing the character of this rural area. slicing and dicing rural ranches and forests.

so an adjustment in prices seems appropriate. even desirable. but when I start reading up on the mechanics of the boom, and by extension the as yet unrealized potential of the bust, a tin foil hat appeared out of nowhere calling my name.

mostly i keep it in the closet.

but days like today where i'm searching for the good news that sent the market up 283 points and finding nothing that instills any confidence that hat is singing a siren song i can hear all over the house.

wish i could turn down the volume.

Hiphopapotamus said...


you're not alone wearing your tinfoil hat. there are even some on the street who are equally puzzled by a 300 point rally based on lackluster retail earnings. the permabulls will roar (bellow? moo?) and we'll just have to let them have their day, but this was a narrow rally that smells to me of institutional traders pumping up their shorts (the futures trended down after the close) ahead of bad news to come - bear stearns restates soon and billions in cdo's and mbs's about to be downgraded. there may yet be some upside as the markets coast on the fumes of hope but once the selling starts it's going to be painful. when joe and mary homedebtor are facing an arm resetting higher at the same time their 401k takes a 25% hit AND one of them gets laid off, i think you might see some motivated sellers who can finally give up on the dream of 2006 prices.

fkav said...

While I agree with the fundamental argument about the cost of housing relative to median income, the economy continues to chug along. Additionally, the world is awash in liquidity and several other countries are forming middle classes with all of the associated consumption. The dollar continues to erode and is likely to make assets in the US appear more attractive. This could continue to support an asset and investment bubble for quite a period.

It is hard to bet against a bubble

Dr, I continue to enjoy reading your blog. I recommend it to friends and think this is a particularly effective article as it points out some of the positions people have taken in the market.

covered said...

Number three! Haha. Funny stuff there Dr. HB. Agree with the Hollywood script aspect.

I've been involved for many years, in some capacity, in the RE biz. From appraiser, to broker (not houses, thank God, but development land) to buyer, developer and recently CA house seller. Peppermint hippo brings up a good point about degrees of emotionalism involving housing.

In many ways, sadly, a house defines many people's self-worth. That's where the attitude comes from. "You're STILL renting?? Prices decline? Are you kidding?? Etc., etc. According to recent polls, fully one third of these people don't even know what kind of mortgage they signed. Still, the desperate need for reinforcement that the mistake they made wasn't a mistake at all and it is YOU who are the fool prevails in this current society. A lifetime of indoctrination (American Dream) affects people that way.

The real money in RE is made when you buy it. That means buying low and selling high (sounds so, er, economically sound, huh?) Not this Ponzi scheme of "buy high and sell higher."

Wall Street icon , Bernard Baruch (the Warren Buffet of his time) said, "When I read about it on the front page, I know it's over." Modernly, since hardly no one reads anymore, I think that could translate into "When it's on every tee vee show Dr. Housing Bubble just listed in his blog, I know it's over."

How long it takes and to what degree it develops are really the only questions left to be asked. How it affects the national psyche will be an interesting phenomenon.

Michael said...

i have to admit, i might be categorized into the apocalypse arena. i believe all the data points to a financial fallout from the largest financial bubble(s) in the history of mankind. the kicker, it's in almost every asset class. never has so many different asset classes risen together with this type of magnitude.

Kristofer said...
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Kristofer said...
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Kristofer said...

Pass me my tinfoil hat please.

Bubbles everywhere!

Would rather not have to keep buying precious metals being that they themselves have more than doubled since 2002, but, when you have 'helicopter Ben' inflating at all costs, how is one to protect ones savings? Perhaps the typical 'real home of genious' might be worth $500K one day, and the dow will reach 36,000. However, what good is that when the average janitor earns $400,000 a year??

It already costs me 60% more to buy a beer when I visit Germany, this in 5 short years. I'm not happy about that.

Don said...

Doc HB,

I guess I'm a member of the "WTF???" crowd. I rent in the South Bay. I moved here just as the housing prices started going crazy about 10 years ago. While I was in the market the prices, IMO were outrageous 10 years ago ($350,000 for 2/1 fixer??). Now that same fixer is listed at $500,000+?? My wife and I decided to rent until all the sellers came to their senses. Although the housing market is not in free fall, yet, I have one question. Does anybody think the housing market will return to reasonable prices (i.e. $250,000 - $350,000 for a 3/2)?

Dr Housing Bubble said...


I think the people in the “wtf” crowd are partly perma bears. The “wtf” feeling comes from wondering how in the world a 500 square foot box is priced at $500,000. But this is based on looking at income and rental rates. The growth of suburbia is amazing. When I’m in the Midwest, it is unbelievable how they slice and dice land like a jigsaw puzzle and erect rows of housing in a matter of months.

No need for the tin foil hat. You can use this knowledge and become a contrarian investor. Knowledge is power. Or you can always sport Reynolds wrap on the head. The DOW going up was because of slight good news that housing foreclosures slightly improved and the spin doctors were out. This won’t last of course. Summer is bringing no housing rebound.


The market run-up is temporary. What about the 415 point loss a few months ago when the subprime market imploded? They are reaching right now. Once we start seeing significant drops in Alt-A tranches, the market is done.


That may be the case for a short while longer. After all, what you’ve mentioned is the reason we are in a bubble. Foreigners view US assets as cheap, at least now. But foreign banks are upping their rates and the Fed will be forced to as well; otherwise the dollar will go lower. This is a global credit bubble. The MBS market is linked to everybody. Keep in mind that the Great Depression impacted more countries than just the US.


This housing bonanza has gone beyond the front page. Everyone is suddenly some Trump housing mogul. “Oh yeah, housing appreciates at 10% a year always.” Really, why is that? “Because it is the greatest investment ever!” This is how a recent conversation went. I wanted to tell the person that if that is the case, a $500,000 home will cost $1 million in about 7 years. Do we see income doubling in the next few years? Maybe, but even if that is the case, you would need to earn about $300,000 a year to afford a million dollar home. But why throw numbers into his Hollywood happy ending.

Be ready for these new shows:

Girls in Short Sales
Foreclose This! – Featuring Mike Tyson
My Payment Just What?!
The Price is Right – Home Edition

Then we’ll know the bubble is done.

No shame in that. We are racking up the number for those in Apocalypse now. I hope some of the stats turn you into a prudent contrarian investor.


Another tinfoil hat. Hey, we should all invest in aluminum companies since so many people are going to sport the new look. It is a damn shame that we need to pay more for beer. That is where we draw the line in the sand. This bubble needs to burst otherwise we are heading to hyperinflation or stagflation – my guess is stagflation. Pass the brew.


It seems like you are also part of the perma bear camp. You are looking at numbers and basing your assumption in reality. The “wtf” feeling comes from running the math. Maybe it isn’t so much a “wtf” mentality but an emotion, like anger or denial. Of course we still have sellers in delusional thinking that we will somehow see 2005 prices again. Maybe they are the people wearing the tinfoil hat crown?