Hilarious book reviews: realtor economist's bubble-inflating books on getting rich through real estate

David Lereah served as economist for the National Association of Realtors and published a series of books advising readers that there was no real estate bubble and that buying highly leveraged property would make them rich. The Amazon reviews sections for these books have become a kind of performance space for highly sarcastic commentary on the conmen who sold America on the idea of going into hock to buy real estate. Here's Mark M:

I agree with other reviewers who have pointed out that this is, in fact, an extraordinarily important book. In particular, it provides a classic example of the mentality that underlies every asset bubble. The author pulls out every trick in the book - demographic trends, financial innovation, macro trends, etc. - to argue that "this time is different." Alas, as we all have found out, this time was not different. What goes up for no discernible reason, must come down. If something seems to good to be true, it probably is. You can try to argue that the "fundamentals have changed", but they rarely do. And when things correct, it can be bloody. (Alas, the difference here was that the hucksters were also able to take the down the financial system, but that's another matter.)

But why this book is important, and why I'd suggest that every investor read it, is because it illustrates exactly the sentiments that lead to absurd behavior in asset markets. Silly assumptions. The belief that the price of some asset will continue to rise. Desperate rationalizations for those price increases. The resulting behavior is not necessarily illegal or unethical (as some other reviewers have suggested), rather it provides a classic case of the mentality that leads to excesses in asset markets. Read this book and learn from it. Because you don't want to get caught up in this kind of garbage.

Brilliant Amazon Reviews: David Lereah's RE Books (Thanks, Barry!)


  1. As with Amway, the gold rush, and bubbles and pyramid schemes generally, the good David Lereah (indirectly) demonstrates the real way to profit:

    Don’t participate in the scam/bubble directly. Sell worthless crap to the suckers who do. During the upswing, you can sell virtually anything as a “can’t fail profit system”, because the rising tide is busy ripping all the boats off their anchors. During the downswing, everyone is emotionally invested in their foundering positions, so it is time to sell a combination of “how to not be like all those other suckers(and if this doesn’t work you aren’t trying hard enough)” and/or “Power of positive thinking” nonsense.

    There often isn’t gold in them thar hills; but there is always gold in the people mining them thar hills, and you don’t even need to get your hands dirty…

    1. Exactly. This is the real way to wealth. It’s not as glamorous or high-profile, but it gets the job done (with a lot less risk involved).

  2. #1-Help boost the bubble by frightening people that they will miss out on being rich without effort.
    #2-Position yourself to profit mostly from the boobies buying your book.
    #2.5- Don’t even bother entering the market
    #3-Retire wealthy

    Fear is always the best investment fear of loss or fear of missed gains when others appear to be profiting.

    #4-Defenestrate self from 50th story office window when your millions are just enough to buy a loaf of bread before the starving proles can hang you from a lamp post.

  3. I am not in any way, shape or form trying to defend the bad economic thinking behind the subsequent bubble-blowing… But the first book (or at least the title; I haven’t read it…) is really not all that silly. Buying a house in 2005 AND SELLING IT 2007 was a pretty good investment decision. Of course, if one believed the price would go up forever and decided to keep the house…
    But there was a definite real estate boom going on at the time the first book was published.

    1. It’s not all that silly… in retrospect. If you sold at the right moment, which most people did not.

      Not silly as much as wickedly harmful.

      I wonder if this guy believed what he was writing.

    2. It’s hard to read in the photo attached to this post, but the subtitle of the first book makes it pretty clear that it’s nothing but nonsense: “Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade—And How to Profit From Them”

  4. Here in Melbourne Australia the bubble is still going strong, I’ve got more than enough for a deposit but I refuse to buy.

    Every time I discuss this with people I say the same thing “With 20/20 hindsight could you have spotted the American housing bubble and if so what is different about Melbourne right now?”. Without fail I hear the same platitudes, Melbourne is different, the “fundamentals have changed”, rent has no relation to the value of a house.

    Maybe I’m wrong, maybe I’ll miss out but I think I’ll just stick to the power of reason, avoid the wishful thinking and wait… remind me, how much did the American housing market collapse by exactly?

  5. Via Wikipedia: “Lereah’s book The Rules for Growing Rich: Making Money in the New Information Economy[5] touting investment in technology company equities was published in June 2000 at the onset of the collapse of the dot-com bubble.”

    I’d say that’s two for two. Can we make it three for three? David, what are your views on student loans?

  6. See that house at the end of the street on the 2007 book cover? The bodies of the family pictured on the first two books lie crushed beneath it.

  7. Good comment pick for the book. I’d certainly advise anyone whether they are going to play in the markets or not to read books like these. In that way they can smell the B.S. anytime they see it.

    There’s several books out there written for sellers called “Closing the Deal” and “Rainmaking”. At least I believe those are the titles, but it doesn’t matter. Anything dealing with that would be a good read for anyone to learn the tricks sellers/marketers employ to influence your buying decisions. (I chuckle every time I sit with an elderly relative at an insurance agent/financial planner/car salesman’s office. Old tricks are continually played.)

  8. I live in Vancouver, one of the bubbliest places on the planet. All sanity has left this place. I know people that have spent $650K on a 1200 sq.ft. townhouse, then look down on me for renting.

    Can some of my american friends out there please send me some encouragement that this madness will end; that I’m making a reasonable choice to not buy; that some day in the not-too-distant-future ALL conversation won’t end up revolving around real estate, and that the custodial staff in my building will stop giving me real estate investing advice…..?

    1. Whats the rental/purchase ratio there? Is renting a lot cheaper than owning?

      I’m from Ontario, Mississauga to be specific, and I recently purchased a house. And all I can think is… renting was so much cheaper. SO much.

      It’s nowhere as bad as Vancouver here, and I love owning my own place, but boy. An extra grand a month, all in.

    2. I just sold my house, which I paid $185K for in 2000, for $525K. A 1200 sq/ft semi-detached in the east end of Toronto.

      The housing bubble is in full force here still, but I wonder how much longer these prices can hold.

      It’s still cheaper for me to own than rent, though.

      1. It’s difficult to say how long Toronto’s bubble will last. There is some slight justification for it in that a lot of “empty nest” oldsters are fleeing the Ponzi scheme of the suburbs and moving into condos in the city. However, in general the population of the city is going down and the supply is ridiculously outstripping any conceivable demand. I think that about 30,000 new condo units are going to be completed this year. A lot of projects are on their second or third owners as they slide into bankruptcy. Some properties have given up on the condo scam and are just renting. Some, like the proposed Giraffe complex at the Dundas West subway station are just a block or so of empty businesses as they can’t even get to the “hole in the ground” stage. There was also a wave of shady landlords jumping through a legal loophole to turn their rental buildings into “residential corporations” (conversion to condo is illegal) that will turn into condos after the renters are pressured out. My lowrise building is one of those. It’s on it’s second or third developer, in the 4th year of renovations and has gone through about one property management company and one general contractor a year in that time.

        The crucial data that’s missing is the percentage of people buying now who are actually buying to live there vs. gamblers or people who have the odd idea that you can make money renting these places out. My guess is that the bubble is being floated by foreign gamblers via Toronto’s (and Vancouver’s for that matter) huge and varied immigrant population. So when the End comes it will be brutally swift as these guys beam their money off shore to the next financial fad.

    3. Reminds me of the story about the guy who escaped the stock market crash that caused the Depression. Once the shoeshine boys outside of his office started to give him “Hot Tips” on railway stocks he decided that the bubble was about to burst.

    4. Another Vancouver guy. The argument now is when the bubble is gonna deflate for Vancouver and Canada in general. I really doubt we’re gonna see a pop like the States, but a deflation is expected.

      Australia’s debt to GDP is substantially higher than ours or the States. Depending on which you think is the more valid comparison, we could be very near to peak credit (compared to the States) or that we may have some room to run if our experience more closely parallels that of Australia. It looks that their debt bubble is now unwinding, so it will be very interesting to see how the next few years shape up for them.

      For the record housing in Vancouver is about 9 to 13 times then annual salary, pending on who’s survey and what year it was done. People in Ontario and Alberta is about National average. Anybody want to recall the housing to annual salary rate was in US just before the crash? Scary.

  9. I also note that your one-stop-shopping place for Housing Bubble ridicule is “Dr. Housing Bubbles” blog!

  10. But Glenn Beck promises me that gold will make me rich, and I saw a sign when I was leaving Yosemite praising Glenn, Jesus, and the USA; and if any area knows a lot about how much gold is worth, it’s California! (even though it’s all in a bank in the middle of beverly hills in somebody else’s name…)

  11. Barry here (who wrote the original blog post)

    It is not about 20/20 Hindsight. LOTS of us were warning about Real Estate in 2005/6/7, based upon metrics such as Median Income to Home Prices or Housing Capitalization as a % of GDP.

    Lereah was a constant voice of insanity, a spin doctor for the NAR. It got so bad that RE Agents rebelled (In Palm Beach FL of all places) because they could no longer get sellers to price homes reasonably. (See this: http://bit.ly/j1c82Q)

    There are always fundamental metrics that reveal what is ordinary and what is extremely unusual. These tend to be early warning signs of speculative frenzies, and those of you who asked or wondered about specific areas (Vancouver, Melbourne, etc.) I suggest you seek out these metrics and pay attention to them.

    PS: Gloster — if you bought in 2005, and sold in 2007, you probably lost money. Add in closing costs, agent’s fees, lawyers, moving, etc. and you probably lost LOTS of money.

    1. if you bought in 2005, and sold in 2007, you probably lost money.

      My house was worth ~600K in September, 2005. It sold for 480K in December 2006. Fortunately, I bought it in 2001.

  12. We got out from underneath our $185,000 house in September 2006 in Tennessee that we were only able to afford because of our 4.25% ARM. Moving back to Michigan and into a house that we could actually afford still gives me the greatest sense of relief, like we dodged a bullet.

  13. ritholtz “PS: Gloster — if you bought in 2005, and sold in 2007, you probably lost money. Add in closing costs, agent’s fees, lawyers, moving, etc. and you probably lost LOTS of money.”
    Pah! Real estate is so 2000s. This decade the buzzword is “cars”. You can tell a canny investor, because he’s buying lowing, redoing the interior and in a couple of months flipping it for a profit. I see the roominess of minivans and station wagons making a comeback, so that’s where I’m putting my money. This market can’t go anywhere but up.
    Cars! Everybody’s in them!*

    * Literally. Their belongings, too.

    1. Totally! Cars4Gold: sheer genius! Some years ago I bought a 1965 Bel Air for $4500. It needed rust work, disc brakes, nice custom interior: but with no tools and less patience I paid someone else to make those improvements. After 18 months and about 10K ‘invested’ my mechanic informed me I would need a new motor and transmission. So I sold it for $1500.

      The only worse investment I ever made was joining my local gym for a grand and going twice. (at least driving the car I got complements, the gym rats in spandex sneered at me. feh.)

      I got a job and started renting in 2000. And sooo many people said I was ignorant for not buying a house. Though I suppose if I bought and held I would now be OK, still, I love my apartment. Safe, comfortable and. . .not expensive. No regrets here.

      Everyones situation is different, and I know plenty of happy homeowners. But thinking about that pie-in-the-sky exuberance (greed) of years past, my take: if you don’t understand it or can’t afford it: don’t mess with it.

  14. The market rates may have gone down, or remained the same. For the homeowner to get qualified for lower rates, there are certain prerequisites but I would recommend you search online for “Mortgage Refinance 123” before you decide because they can find the 3% refinance rates.

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