The present real estate boom is collapsing and heading the nation towards a depression, according to John V. Lintner, assistant professor of finance at the Business School.
In the January issue of the Harvard Business Review, Lintner observes that potential buyers are much more discriminating, the number of real estate transactions is falling off, and more people are failing to meet payments. These tendencies are the same which signaled the real estate bust in 1929, he declares.
Lintner thinks that study of mistakes in past mortgage policies can forestall any impending ruin in the real estate field. When the last depression came on, he explains, bank lending policies were unwise. Heavy losses began to show up on real estate loans, and banks withdrew from the mortgage market. This was the time when risks on new loans were the smallest and the country needed willing mortgagers, Lintner explains.
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