Tesla CEO Elon Musk has no shortage of opinions to share on Twitter, from his views on cryptocurrency to claims that Tesla stock prices are too high.
The latest tweet wiped out $14 billion worth of company value in just seven words, so to say his opinion can move markets is an understatement.
Musk has now turned his attention to the housing bubble in response to a tweet by Dogecoin co-founder Billy Marcus, who goes by the Twitter name Shibetoshi Nakamoto.
Did predatory lending cause the housing bubble to burst?
In a tweet, Markus stated that the cryptocurrency was originally created in response to the central bank’s tight control arm following the 2008 recession, which led to rampant money printing and bailouts.
The decentralized nature of cryptocurrency avoids manipulation by governments because, in essence, no one controls it except for a predetermined algorithm.
Marcus also blamed the 2008 recession on predatory lending practices at the time that allowed previously unqualified buyers to buy homes with little to no money and low mortgage down payments that increased over time.
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Musk disagrees: “They dug their own graves”
Musk responded to the tweet by opining that the fundamental mistake made during the 2008 recession was to assume that home prices were only going up.
He cautiously noted that he did not support predatory lending, but also said that many of the same lenders were seriously injured or did not survive the housing market crash. “They were digging their own graves – a lesson we should all take to heart, including me,” he said.
According to Musk, the critical mistake made by lenders, which caused them to lower their lending standards and led to their decline, was the “axiomatic fallacy” that home prices could never go down.
The axiomatic mistake was that house prices are only going up. I do not support predatory lending, but many of these lenders were seriously injured or did not survive.
They dug their own graves, a lesson we should all take to heart, myself included.
— Elon Musk (@elonmusk) May 14, 2022
Lessons learned from the current housing market?
With interest rates rising and inflation hitting the current housing market, it remains to be seen if lessons have been learned from the housing crisis 14 years ago.
Huge price spike since the 2020 COVID-19 pandemic as telecommuting has reshaped the housing market and buyers have rushed to pay whatever they want for fear that prices will only rise.
With the recent rise in mortgage rates doubling in a few months, the percentage of monthly mortgage payments has skyrocketed for new purchases, potentially adding an extra $1,000 or more and reducing affordability.
This affordability crisis has brought home price growth to a halt, but only time will tell if the housing market remains more resilient this time around.
Let’s hope that 2022 will not forget the main lesson that Musk pointed out from the 2008 crisis – housing prices do not always rise.
Andrew Herrig is the founder of Wealthy Nickel, where he writes about personal finance, jobs and entrepreneurship. As an avid real estate investor and owner of several businesses, he has a passion for helping others create wealth and shares his family’s experiences on his blog. Andrew’s advisory board has been featured on CNBC, Entrepreneur, Fox News, MSN and more.
