The Coming Crash in the Housing Market: 10 Things You Can Do Now to Protect Your Most Valuable Investment [Paperback]

Valuations on Real Estate in general are much less developed than valuations on equity, while equity valuations are arguable science themselves. Therefore I think Talbott did a great job in presenting his arguments from as many as possible angles by using ratios and charts. It would be better if he could have used data that dated further back in history, but I doubt there are enough records in this area. Simple based on records starting from 1970's, the fact has been clear: the housing market madness in the past decades has reached an unsustainable level providing business practices of the industry, dark sites of Fannie Mae and Freddie Mac, and evidently general public's mentality on Real Estate.

Housing market is extremely local, so I think the author did a decent job in printing a bigger picture since commenting on local markets and predicting timeframe is technically infeasible. It's your job to make judgment and take actions once facts are presented. The author virtually tells us:
1) There are structural problems in US housing market (yes, we do!)
2) Being over stretched in debt financing normally ends in crash (Isn't this true!)
3) What goes up comes down (Law of nature, isn't it?)
4) When everyone is eager to get into something, be watchful (Have we heard of "herd mentality"? How did it end?)

It's a great book to understand some dynamics of US housing market. Highly recommended!

Talbott gets into the increasing housing costs for individuals, especially the recent spike that economically doesn't make sense. He goes through the range of reasons, from the low interest rates, the stock market abandonment, to the increasing amounts of leverage. He then explains how those prices are out of range historically.

The most impressive and eye opening part was the thorough and precise explanation of the inefficiency of the housing market. He goes through the irrationality of the current home owners, mortgage insurance companies, the bankruptcy system, and tells how the structure of Fannie Mae and Freddie Mac encourages increasingly risky and extended loans while shutting out healthy competition.

The only disappointment was the fact that I was not convinced of a crash. He did an excellent job of showing the overpriced market, but gave no reason why a correction would be sudden or dramatic, as opposed to a gradual leveling off in a few years.

All in all, it's an informative and worthwhile read.

Then a lot of homeowners will end up with "underwater assets" meaning the outstanding balance on the mortgage is higher than the market value of their homes. This is particularly likely since the current custom is to keep taking home equity out with refinancing. These owners have no margin, and if they have to sell, they could be bankrupted.

If you know someone about to buy a home, buy, read, and give them this book. They might consider a slightly smaller home, and end up ahead in the end.

BTW, the author is not exactly the font of all wisdom. He actually called Michael Moore's cruel and deliberately deceptive movie, Bowling for Columbine, a "wonderful documentary"!! I was glad that was on the second to last page.