Welcome to Florida Time, a weekly column about Florida history. Today, we hear about the real estate boom and all of its madness from the ‘Binder Boys’ to

What do people mean when they say that deregulation and the greed of Wall Street caused the financial collapse of 2008?

My parents moved to south Florida decades ago, and naturally, the wife and I made multiple visits per year over the period from the early 1990s until perhaps 2013 or so. We watched the effects of the previous housing bubble, and its collapse in the late 80s. We would visit the same new communities on each visit to find out how housing prices were going, and talked to many people in my parent’s community, and visited open houses in that community.

In the early 90s, housing prices in FL were relatively modest, but by 1995, prices were escalating yearly, and by about 2002–2003 or so, prices were escalating at a rate of about 25% per year. This, we subsequently found out, was not much faster than the appreciation rate in many parts of the sunbelt. Numerous reasons were given for the appreciation, but mostly, they centered around demographics. The “greatest generation” had retired, or was retiring, and the baby boomers were buying houses in anticipation of retirement, or because they were retiring. There was a mass exodus from the north to the south, west, and southwest going on, and housing prices were reflecting this.

In FL, you could walk into a development under development, and the pitch was this: “Buy your house today. We’re so busy that we won’t actually start building it for at least six months, and it won’t be habitable for a year or more. In the meantime, housing prices are rising so fast that you can probably sell it before its even competed and make a ton of money. In fact, we’re acting as a broker for many people who bought houses six months ago, and you could even buy one of them for today’s prices, and move in in three to six months.”

Quite the pitch. Put $1,000 down on a house, then sell the rights to buy the house in a year, and pocket as much as $100,000.

I knew the scam was on. My brother worked construction and told me that builders were deliberately not building houses to push up demand, and make the whole scam work, that in fact, there was no shortage of construction workers. Whether that was true or not isn’t the point. The point is that people were being promised huge profits just for contracting a home that they had no intention of living in. When that begins to happen, you know a bubble is well underway.

What really set our teeth on edge was when my sister, a secretary in a school in the Buffalo, NY area, told us about one of her fellow secretaries who, along with her mother, had bought a house in Florida, and made over $100,000 even before construction had begun on it!

When it gets to the point where secretaries and figurative “shoe-shine boys” are participating in the scam, you know the bubble is about to burst.

Didn’t happen where you live? Probably not. Equally though, few people take the time or the interest that my wife and I took in our investing. We saw, because we looked. If you didn’t look, you didn’t see it.

We prepared to move from NC to the DC area in 2006, and connected with a real estate agent who was refreshingly honest. Her first question was “How long do you plan on being in the area?” We said we didn’t know. She said that she’d just gotten back from a real estate agent’s convention in DC, and that housing prices in 2006 were down by 25%, and, expected to fall another 25% in 2007, but, if you plan on living in the area for 10 years you’d probably be alright. She recommended we rent, which we did. I went back to NC, where housing prices had been growing about 3% per year (not the 25% in the sunbelt and, as we were told, the DC area), did some upgrading of the house, and had it sold by September, 2007, which, as it turned out, was about the top of the market. I occasionally still look at the old house, and it’s still not worth more than we sold it for 10 years later.

Greed is hard to categorize. We know it when we see it in others, but when we’re greedy we’re “taking advantage of a rising market.” Many, many people were buying houses in the sunbelt, DC, and other areas with an eye towards profits through speculation. Many people bought second homes, third, and even fourth homes (or retirement homes) they hoped to rent and have appreciate, or have available when they retired. It was as much a mania as tulip bulbs had once been. I knew that when I hard that secretaries in the north were speculating in the housing market, LOL. I also knew it was a time to sell, not buy.

Certainly, declining interest rates had played a part. I bought a house in 1981 with a 12% mortgage. When the mortgage rate got down to about 6%, the mania was on, and simply grew as rates continued to decline, which they did. Today, folks get upset when the rate goes up from 3.25% to 4% like it’s the end of the world and the increased cost is keeping them from their dream home.

Housing bubbles are a regular part of American life. But they usually take between 10 and 20 years to percolate up and then burst, and by then few remember the previous bubble. In the early 80s I knew some real estate agents who were going bust because they had bought as many as a dozen homes as rental properties, usually on non-fixed rate mortgages, and when the bubble of the 70s burst, they couldn’t sell them, and couldn’t afford them. When I did finally move to Bradenton, FL in 2010 or so, my agent there had a tale to tell about his son who had gotten caught and had to file for bankruptcy when the market began to fall apart in FL in 2008 – two years after it began to decline in the DC area.

You simply don’t see these things if you’re not looking for them, or live in an area where home prices continue to plod along at a snail’s pace, and it all seems abstract, as an outsider. You also don’t read about these bubbles in your local paper – unless in your locality it’s an issue. But greed on a personal level? A ton of it, certainly enough to go around.

As to Wall Street, they bundled mortgages being written by mortgage writers who would never hold the mortgage for more that a few hours, if at all. There was plenty of room there for a lot of flimflammery, and those developments in FL were all using mortgage writers, usually only a few feet away from their own sales agents. Nobody had a stake in the mortgages written, and by the time they got bundled by Wall Street no on could credibly say they were worth the paper they were written on. Everybody was getting rich, as they always do in housing bubbles, developers, sales people, mortgage writers, and even buyers. What could go wrong? The market topped, then toppled over is what went wrong. Bubbles always end that way. It’s, as the Eagles put it, “The lure of easy money” and it’s infectious and ubiquitous enough that it can even drag otherwise fiscally-conservative secretaries to take the plunge. The niggling problems only begin to occur “when the music stops” and everyone begins to learn that it wasn’t real, only a bubble. Of course they don’t believe it. But if you know history, you know they come around all the time. We are, in all probability, on the cusp of the “next” housing bubble which will probably be driven by millenials leaving the cities for the burbs in order to raise families, millennials being the largest demographic in the population today. It will probably become noticeable in about 2020, maybe a little later, will probably last for about 10–15 years, and then will burst like all bubbles before it, maybe in 2030 or so, maybe slightly later. Shocked that it can be predicted? Only if you don’t know the history of housing bubbles, or if you’re simply not paying attention or looking. Where will this bubble occur? Predictably, in the sunbelt, like they all do. Florida swamp land was the darling of speculators in the 1920s. It never changes, only the players rotate in and out.