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Housing Bubble Warning Indicator Report for Public

No. Description Based on Situation as of ______________ Normal Date or see
appendix
 


Section 1 Housing Prices and Mortgages

    
1 Ratio of individual's monthly house payments to their monthly income

    
2 The cost of owning to cost of renting rate

    
3 House prices: Identify regions of country particularly affected with percentage of increase

    
4 What is the percent of residential investment (in new homes, apartment buildings, improvement to existing homes) to gross domestic production

    
5 Does real income or other factors warrant an increase in housing values?

    
6 Are rising housing prices increasing number of second mortgages, refinancing for improvement loans or to pay off credit card balances?

    
7 Mortgage loans originated by years
  A. By years by number
  B.  By year to date
  C.  By year by dollar total

    
8 Number of mortgage foreclosures

    
9 Are originating mortgage brokers or mortgage lenders enticing people to borrow:
  A. With lure housing prices will continue to rise
  B. Use of dishonest appraisers, contractors
  C. With high pressure sales tactics including bait and switch
  D. Encouragement to lie about their income

    
10 What percent of down payment is required on the house in relation to cost?

    
11 Mortgage rates?
  A. Fixed regular rate
  B. High rate because of extra risk
  C. Low initial rate then increased

    
12 Prevailing practice on mortgage principal repayment terms
  A. Normal
  B. Juggled to reduce monthly payments

    
 


Section 2 Banks and Financial Organizations

    
13 Have banks and mortgage companies relaxed their requirements for granting mortgages?

    
14 Are there indications of excessive greed on the part of people engaged in housing and mortgage security businesses?

    
15 Is the excessive greed on the part of mortgage brokers, banks, mortgage companies, and derivative issuers to the point of possible dishonesty?

    
16 Are mortgages being resold and then packaged for resale to investors (derivatives) being honestly and carefully analyzed for quality of mortgages?

    
17 What is the volume of mortgages being repackaged into securities (derivatives)? If large, this can put upward pressure on home prices.

    
18 Are rating firms honestly and accurately rating these derivatives?

    
19 Are computer model programs to limit risk reliably based and not based on incorrect data?

    
20 Is there an influx of money from foreign sources for buying mortgage securities?

    
21 Is the influx of foreign funds driving interest rates down?

    
22

Are secondary allied bubbles caused by home value bubble causing other problems in areas such as credit card debt, commercial real estate loans, corporate debt, student loan debt, loans for leveraged buyouts, auto loans, and small business loans?

    
 


Section 3 Psychological and Emotional Factors

    
23 Is there a period of excessive optimism of home values with one-sided story tellers which overcomes normal standards of good business practices, risk taking, and judgment of future? Is this driving the whole economy up?

    
24 Are rising house values attracting investors, speculators, scam artists, and more one-sided story tellers?

    
25 Are people switching investment money from the stock market for supposed safety of the real estate market?

    
26 Are bubbles forming in other fields or likely to form based on a housing price increase bubble?

    
27 Do the bubbles in other fields in turn enthuse people's feeling of wealth and loop back and further increase the real estate bubble?

    
28 Are people so enthused with rising values they ignore, resent, or even get angry at others who present evidence and try to prick or break the bubble?

    
 


Section 4 Influence of Government Policies

    
29 Are activities of Fannie Mae and Freddie Mac being properly controlled by their executives and Congress? Are they under pressure to loan to minorities even if their credit rating is poor?

    
30 Are any acts of Congress such as the Community Reinvestment Act of 1977 contributing to the housing bubble by causing those who are really unqualified to receive a mortgage to obtain one?

    
31 What effects are Federal Reserve interest rates having?

    
32 Are lower priced homes appreciating in value more than higher priced ones?

    
33 Is Congress failing to regulate any important risky areas such as derivatives?

    
 


Section 5 Past - Present - Future

    
34 Past:
Are our leaders and their advisors familiar with the history of past economic crises such as described in Manias, Panics and Crashes by Kindleberger and Aliber (2005)?

    
35 Present:
Ingredient 14 of SM-14, the scientific method of problem solving, calls for proper attributes and honesty is listed as essential. No laws, rules, or regulations will prevent economic crises if dishonesty prevails whether it is considered excessive greed, bad ethics, poor judgment, denial of the apparent, lack of good quality control, selfishness, meeting competition, etc. Are there any areas mentioned that need to be considered, examined, or researched?

    
36 Future:
For the prevention of future economic crises it is necessary that our students be taught the scientific method of problem solving and decision making (SM-14), including its prevention features.

    


Comments

  • I am not an economist or a home prices expert, but a creative problem solver. This form is presented as an idea. It needs improvement and refinement.
  • No appendix comments have been prepared. These would be added by the report issuer.
  • A shorter version may also be issued that would be more acceptable to the media.
  • This form should be discussed and studied by student MBA candidates, economists, and others. They should all be training in the scientific method of problem solving, SM-14.
  • Bubble trouble and crisis prevention in some other subject areas may require a similar form but with different indicators.

 

Who Should Issue a Bubble Report or Crisis Communication?

There were a small number who warned of the economic crises of 2008. They were not listened to. The reason may have been their warning was not complete enough, not coming from an authoritative enough source, or ignored by media, although most people were just not open minded to the idea of an economic crisis occurring.

The business and economic organizations should establish an independent economic bubble and crisis prevention group to constantly watch for bubbles and possible crises and issues warning reports. The opposition to reports by the participants profiting from a bubble is so great that some action must be taken to overcome this.

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