The Housing Boom and Bust

Summary

Sowell, a Senior Fellow at the Hoover Institution, explores political and economic causes of the American housing crisis. For example, he links the Community Reinvestment Act to decreased lending standards that resulted in an increase of subprime mortgages, as the law forced banks to set up quotas of lending to minorities. As a result, "lenders had to resort to 'innovative or flexible' standards." He also contrasts housing prices for modest middle-class homes in California and Texas and theorizes that California, with open space and various other zoning laws, had homes that were more expensive that those of similar size in Texas, which lacks such laws. Politically, Sowell targets the George W. Bush administration and Congress members of both major political parties for obstructing audits of Fannie Mae and Freddie Mac and enabling banks to make highly risky housing loans. Regarding housing prices, Reason magazine summarized his stance: "the immense local variability in housing prices and failed loans reveals that the government mistook a set of local problems for a national one."

Critical reception

Walter E. Williams, a colleague of Sowell and economics professor at George Mason University, called the book "an eye-opener for anyone interested in the truth about the collapse of the housing market that played a major role in our financial market crisis." For The American Spectator magazine, Joseph Lawler considered The Housing Boom and Bust "an examination of the ruling class's inability to leave well enough alone." Robert J. Samuelson, reviewing the book for Newsweek, commented: "Although one-sided, Sowell's account qualifies the standard story that greedy investment bankers and mortgage brokers caused the whole crisis."