Fed Research: A&E’s Flip This House Responsible for Real Estate Bubble

On Twitter, I’ve said (primarily, as a joke) that, in addition to Wall Street, we should blame the real estate and mortgage meltdown of the late ’00s on TV shows like A&E’s “Flip This House” and The Discovery Channel’s Flip That House.

I based my theory of the real-estate crash using Rex’s Razor, a cheap knock-off of Occam’s Razor, that can be summed up this way: Always look for the most obvious reason that can be explained with a TV show, a book, a movie, sports trivia or a pop-culture reference.

Fortunately, a group with a little deeper research budget than mine, the Federal Reserve Bank of New York, actually hired some researchers to do a study, who came up with a theory that says “amateur investors” share the blame in blowing up the bubble of real estate.

Quote from the AP story, “Home flipping drove housing bubble“:

“Researchers … found that investors who used low-down-payment, subprime credit to purchase multiple residential properties helped inflate home prices and are largely to blame for the recession. The researchers said their findings focused on an “undocumented” dimension of the housing market crisis that had been previously overlooked as officials focused on how to contain the financial crisis, not what caused it. More than a third of all U.S. home mortgages granted in 2006 went to people who already owned at least one house, according to the report.”

While the Fed researchers leave out the part about what inspired those amateurs, it doesn’t take Sherlock Holmes to figure out that some of the blame can be easily placed on cable TV reality programs that continuously spewed lies suggesting an investment of $5,000 in fixing up a house could be flipped into $25,000 if sold.

Unlike other very good home improvement shows, the programs I’m referring to were never about fixing up a home to make it more livable. These shows were recruiting viewers into real estate investments of the most speculative kind. And they were so transparent about their motives, they used in their titles, the get-rich-quick term, “Flip.” As in, this is not about living in a house. This is not about the American Dream of home ownership. This is about a highy speculative residential real estate investment where you buy, fix and flip.

Yes, blame Wall Street. I certainly do.

But also blame “Bravo’s Flipping Out.”

I would say that I’m glad those shows no longer air — except they do. They’ve been retooled into programs suggesting viewers can purchase houses from foreclosure, then fix them up and yes, once a sucker, always a sucker, flip again.

Or, as we’ll call it on this blog, the next great way to lose any money you still have.