Could a contagion hit real estate? Not now, Inman founder Brad Inman writes. But cavalier lending, greed and bad actors can all wreak havoc on the housing market.

In these times, double down — on your skills, on your knowledge, on you. Join us Aug. 8-10 at Inman Connect Las Vegas to lean into the shift and learn from the best. Get your ticket now for the best price.

Sometime between 2007 and 2010, with the subprime loan crisis in full view, consumers lost faith in the real estate market and raced to dump their property. It was like a virus, and it was scary.

Millions of homeowners were underwater by rapidly rising mortgage payments on their variable rate loans. Owners scrambled to sell their homes, others walked away from their houses and their obligations. The banks foreclosed and they dumped seven million houses on the market.

A real estate contagion was at work and it was unstoppable. 

When supply flooded the market, prices plummeted. An estimated $7 trillion in house equity vanished in mere months as the housing market unraveled. 

Three hundred banks went under from 2007-2010 when Washington Mutual collapsed.

The contagion that hit the financial markets over the past week unfolded more quickly, enabled by iPhones and digital banking.

A staggering $40 billion in deposits were withdrawn from a single bank in a matter of hours.  Within a few days, Silicon Valley Bank was seized by federal regulators

Other regional banks suffered huge losses. Now, everyone is working overtime to contain the contagion

It’s a sorry sight when customers line up outside of bank branches — a frightening image of financial and government failure.

It was the same sad story with FTX six months ago, when crypto depositors suddenly offloaded their tokens. Then, the dominos fell, as other exchanges, two crypto banks and hundreds of related businesses collapsed in a matter of weeks.

I never believed in the contagion theory that these events are a function of irrational consumer behavior.

The public’s self-interest is very real and their actions are quite rational.

Our free-wheeling financial system is the problem. While banks are heavily regulated, they fail because of holes in the system that leave it unprepared for unexpected events.

The public pays the bill for institutional shenanigans.

In the case of crypto, it was underlying fraud that scared investors away. In banking, sloppy management and asleep regulators are to blame.

Could a contagion hit real estate again? Not now, would be my best guess. But cavalier lending, greed and bad actors can ruin any real estate party.

Some believe commercial real estate is teed up for another big property disaster. Too much leverage, sky high vacancies and falling rents are a recipe for another financial tsunami.

Like a virus contagion, once it begins spreading, it knows no limits. Then, leadership is too late.

Email Brad Inman

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×