Unreal Estate (Published 2009) (2024)

“The one Gnostic truth of real estate,” Frank Bascombe, Richard Ford’s gimlet-eyed Realtor-as-Jersey-philosopher, observes in “Independence Day,” is “that people never find or buy the house they say they want.” Instead, he counsels, “you’re presented with what you might have thought you didn’t want, but what’s available, whereupon you give in and start finding ways to feel good about it and yourself.”

In the last decade in America, however, a counter-truth took shape: People were presented with what they thought they couldn’t afford, whereupon they, fully aided and abetted by novel “mortgage bankers” — and, it turns out, just about the entire supply chain of modern capitalism — gave in and started finding ways to finance it.

According to the usual rules of Frank Bascombe’s game, Edmund L. Andrews, an economics correspondent for The New York Times, wouldn’t have been able to get the house he wanted, a “three-bedroom cottage at the end of a tree-lined lane” in suburban Maryland. He would have been gently steered to a cluster of more modest “comps,” perhaps dissuaded from buying at all. But the rules had changed, and there were people like Bob, a broker specializing in “unusual situations” — e.g., how to procure a half-million-dollar mortgage for someone who, according to the transaction’s final terms, had no “stated income.”

As in the 1950 film “D.O.A.,” which opens with its Every­man protagonist entering a police station to declare his own murder, then racing against time to learn who has poisoned him and why, Andrews’s financial noir tale opens with the author already on the verge of default, confessing to no less a financial authority than Alan Greenspan. (“Why did you do it?” the former Federal Reserve chairman, like a detective querying a perp, asks across the table; “I took a gamble,” Andrews responds.) The narrative then spools back to the sequence of events leading to the tragically ironic denouement: a man who spends his days covering economics for one of the world’s leading newspapers — who himself wrote “several early-warning ­stories . . . about the spike in go-go mortgages” — becomes a supporting player in the story of the young century, the national meltdown triggered by the subprime mortgage crisis.

Andrews admits he should have known better, but one of the tenets of “Busted” is that “many of the people who should have known better did know better.” Cassandras like the Merrill Lynch economist David Rosenberg, who spoke darkly of home prices outpacing Americans’ ability to pay for them, were drowned out by the ringing of the till. “As an economic voice, you might say, Merrill Lynch was courageously and almost constantly warning the public that the United States was dangerously overextended,” Andrews writes. “But in the real world, where Merrill Lynch was making billions of dollars in profits on exotic mortgage-backed securities, it was trying to torque up those winnings by using vast amounts of borrowed money.”

There was, it turns out, a collective gamble going on — an all-in bet that increasing home ownership was a good thing (“worth the risk,” as Greenspan wrote), and that the rising tide of real estate prices, even when they began to surge beyond historical precedent, would cover the riskiest outlays. Andrews’s autopsy on his mortgage and the conditions that helped produce it is sharp and at times mordantly funny, but I couldn’t help being drawn more toward the messier personal narrative, looking for hints of the trouble to come.

The behavioral economics revolution has taught us that no man, including an economics correspondent, is pure hom*o economicus, a cool and rational calculator. Experiments have shown that even nutrition experts unwittingly eat more ice cream when given larger spoons. As other studies have shown that people say they will drive across town to save $5 on a $15 item but not $5 on a $125 item, we should perhaps not be surprised that people would fall victim to complex financing instruments that were ultimately not in their own self-interest.

And then there is love: in a house, romance and finance uniquely commingle. Neither marriages (“until death do us part”) nor mortgages (the root “mort” implying a pledge that “dies” when paid in full or defaulted upon) are without risk, as the recently divorced well know. As Andrews admits, the “fever for romance and the speculative fever to get rich have a lot in common.” Reading “Busted,” one suspects that Andrews plunged into both with reckless abandon. He proposes to his new wife, Patty, over the phone, before they have even kissed. He offers nearly half a million dollars for a house he has not seen.

There is a whiff of ex post facto mythologizing at work here, as if he were trying, a bit too hard, to convince himself of his own story. Both he and his wife had left their long-term spouses and “proudly risked everything to be together,” in a “glorious gamble.” She was “brainy, regal, sexy, fiery and eclectic,” Andrews writes in a bit of heated salesmanship better reserved for a New York Review of Books personal. In buying that house on the leafy lane, Andrews asks himself, “why had I tried to keep up the image of a conventional suburban family man, when nothing about my situation was conventional?” — an interesting question he never really answers. In the end, I wasn’t sure whether “Busted” was brave or just therapeutic. It has since been noted by Megan McArdle of The Atlantic that Andrews’s wife has twice filed for bankruptcy (the second time while they were married), a fact that Andrews omitted from the book and now insists has nothing “to do with our subsequent financial problems.” But given the book’s accounting of $300 payments to Verizon, not to mention the pages it devotes to marital fights over money as he struggles to imagine things from his wife’s point of view, this seems disingenuous.

Alyssa Katz, a New York journalist and the author of “Our Lot,” could no doubt have landed an exotic mortgage when her rent-regulated loft building went upscale condo. But she concluded the deal wasn’t worth it, and moved “off the map” into deepest Brooklyn (and probably found ways to feel good about it, even as she admits to checking the sales history of friends’ homes on ­PropertyShark.com).

But “Our Lot” is less a personal tale than a trenchant chronicle of how “all that had been sacred about home lending” was upended, through a series of government policies that were enacted with seemingly noble intentions — broadening home ownership and priming the economic pump — but ended up turning homes into profit centers rather than places to live. At “the nadir of the insanity in 2006,” she notes, an estimated “two out of every five homes in Sacramento and vicinity had been bought by someone seeking to resell within two years.”

In one of the book’s most absorbing chapters, she visits South Florida, where the bromides of wealth gurus like Tony Robbins at a packed “Real Estate and Wealth Expo” are contrasted with the despairing tales of investors under water on dusty lots in speculative-build communities that come off like Potemkin villages in Margaritaville. Real estate values were rising in a place like Cape Coral because it had the nation’s fastest growing job market — but “most of the jobs, it would turn out, involved building, financing, or selling houses to speculators.”

Of course, South Florida had seen its land crazes before, with eager Northerners snapping up swampy lots sight unseen. Only this time, with mortgage money flowing faster than orange juice, houses were actually getting built, often in places where the demand or appeal was unclear. Sure, people were gullible, living beyond their means as Andrews admits to doing. But as Katz reminds us, the real estate bubble was also a crime scene. The only trouble is delineating where crime ended and social policy began. Mortgage fraud is an elusive term, Katz writes, but “can be boiled down to any transaction where a buyer or seller lies to reap more money on a deal, or to qualify for a purchase they otherwise couldn’t get.” That, of course, “would apply to much of the everyday business of the home trade in the mid-2000s.”