[at 3:41min] “All of a sudden, in the early 2000s there is this huge boom, and then sudden collapse. Now, it’s partly due to the sub-prime lending revolution, and that’s why the low tier homes went up the most. But I wouldn’t blame it on the sub-prime revolution, because sub-prime primarily effects low price homes, and you see the high priced homes in the same boom. Moreover, I think the sub-prime revolution is in some sense a consequence of the housing bubble… people got so excited about housing, the lenders believed it too.. thinking they were doing these low income borrowers a great favour by getting them into a mortgage. .. They all believed that home prices were going to just go up and up… I know they believed this because [we did questionnaires about expectations]. The mean [home buyer] expectation in LA at the peak of the market was 23% per year for the next ten years.. that’s what people told us… about a third of the people were just wacko about this.. you know it just can’t be right. [comment on compound interest].
This boom was driven not by a sense that we were in a temporary boom, that you want to get out of, it was driven by a sense of a new reality, that home prices would just always go up at 10% a year… it ain’t so, prices don’t do that… people got this crazy idea…”
“This is Las Vegas… isn’t that amazing?… Las Vegas, which is the gambling centre of the country… All of a sudden, wham… In a lot of the cities, the prices are back.. the bubble is over.. the concern now is whether we’ll overshoot.”