There is a very specific time period where this was happening. From about 2004 to 2007, the number of privately securitized loans that were part of this scam was much higher than in any other period.
Just think how many new, unsuspecting homeowners must have been drawn into the housing market by this massive amount of activity. Nearly $2 trillion in predatory loans to unsuspecting, unqualified borrowers. That would have to translate into more than 10 million borrowers.
In any given normal year, there might be a million and a half first-time home buyers. Just think how much first time home buyer levels must have jumped, even if a small portion of those $2 trillion in new loans had gone to those unqualified borrowers.
Finally, I have some data from the American Housing Survey to document this terrible predation. This massive expansion of marginal homeownership to households who had no business being owners.
If you are trying to figure out how you are reading these graphs wrong, you can stop. You're reading them correctly. There wasn't a surge of first time homebuyers. There was a drop in first time buyers during the private securitization boom, and at the same time, there was a surge of households out of the housing market.
First, to a first approximation, everything we thought we knew about the housing boom is wrong. Take your brain, shake it up like an etch-a-sketch, and start over. Until you can do that, you will be pointlessly defending false pretenses.
Second, remember how we had to have the housing bust and the recession, because the previous period of overconsumption and over-borrowing, built on the backs of the lower middle class, required it? Remember how deregulated markets allowed lenders to put debt on millions of households, and healing meant letting those lenders go bankrupt and those borrowers default? Remember how we had to sharply curtail lending to households who had been borrowing from banks and GSEs for decades because national financial penance and prudence demanded it? Remember how the Federal Reserve couldn't provide cash for an ailing economy, because it would just allow these housing speculators to skate by without the discipline of the market? Learning the first lesson means recognizing this second lesson. Learning this second lesson probably means feeling guilty or defensive, or incredulous.
Take that etch-a-sketch and shake away those feelings, too. The health of the American working class requires us to. To the extent that many households on those margins are still hanging on to their homes, their home values have probably, generally, been dealt a 20% negative shock or more because we have devastated the owner-occupier market for those homes that had been in place and stable for decades. If a home normally is worth about 3x an owner's annual earnings, then we have wiped away the savings of millions of American households to the tune of 6 months earnings or more.
A lot of damage has been done. The good news is, some of this can be undone. The millions of first-time homebuyers missing over the past decade can still buy homes, if we let them borrow like millions of Americans safely had for decades. By the way, that will require millions of new workers in the construction sector. Many of those workers might be Mexican immigrants. The animus those immigrants will experience in an economy where they are building homes for working class families will be much less than the animus they experience now in an economy with few homes for them to build. It will also help regain working class savings in home equity and it will lower the cost of living for so many families renting in markets that are lacking in supply.
The bad news is that we did this. The good news is that this means we can change it. And, we are all in this together. Across the political spectrum, the errors that have been committed change. Some blame deregulation and bankers. Others blame the GSEs and the CRA. Others blame the Federal Reserve. But, everyone has been blaming their selected foils for something that did not happen. We all did this in our own ways. Now, we can all shake our internal etch-a-sketches, and work together on the one thing that needs to be done, which is to simply give up our false presumptions and stop fighting political battles over phantoms.