Is this the kind of frenzy you'd like to see in ithe housing market? I don't think so. (Photo: iStockphoto)
I ran across a blog post the other day from John McManus, the editorial director of several real estate trade magazines and a former colleague of mine. The headline was "Long Absent, Buying Frenzy Resurfaces as a Way to Describe Home Buying." Intertwined with his discussion of the housing demand as buyers try to beat the deadline for the $8,000 first-time home buyer tax credit was a sort of giddiness at being able to even use the term "buying frenzy" after so many gut-wrenching quarters of relentless bad news.
"The fingers type the words ‘buying frenzy’ with zest," he wrote. "Possessed of their own emotional impetus and trajectory, the digits that ply their trade on the keyboard most of the day realize that they have sorely missed typing out the terminology of our now utterly bygone risk-a-philia and profligacy."
John’s an incredibly intelligent guy and I have tremendous respect for his work, his understanding and analysis of the housing market, and his command of the language. Honestly, I didn’t even know what "profligacy" meant until I looked it up after reading it in his post.
Frenzy is not a good thing
But I have to disagree with his position that any return to a buying frenzy is something to be celebrated. While I had my dictionary (okay, Google) handy, I decided to take a peek at the word "frenzy."
Here is its definition: craze; state of violent mental agitation.
Yeah, that’s a pretty good description of what the housing market was like earlier this decade and I think we’d all agree now that frenzies are not a good thing. People don’t think clearly when they’re in a frenzy, and the impact of decisions made that way can be horrendous.
During the real estate boom, the prices were going up so much and so fast, people bought whatever they could find because they were afraid that if they didn’t buy a house right then, they’d lose their chance forever. Lenders responded to the skyrocketing prices (and the limitless opportunity to make money) with such innovative products as negative-amortization, interest-only loans and my favorite, the NINJA loan, short for no income, no job, no assets. Homeowners saw the value of their homes increase at dizzying rates, stripped them of this new-found equity and turned a solid, long-term asset into an ATM to pay for cars, boats, vacations and anything else they could think of.
Then, like a high-speed train with an engineer asleep at the controls, it all came to a sickening, catastrophic halt. Millions of Americans are still trying to crawl away from the wreckage, and many of them will never really recover from their injuries.
Is that really something we want to see happen again in the housing market? Not me. I saw the train wreck and I’ve still got nightmares. Personally, I’ll be happy if I never have a reason to use the word "frenzy" in a real estate story again. —Pat Curry