[Soliton]

No it wasn't. A rising market creates speculators, not the other way around.

Pass a law that says that, henceforth, you can only own one home at a time. What would happen? Homes would appreciate with population growth and money supply

Besides, rising and falling markets reflect organic supply and demand. Speculation is gambling and it continues until the money runs out (usually borrowed money). Speculation is the cause of all economic bubbles. They pop when the money stops.

[Moonman62]

By definition speculation stops when prices stop going up. Look at the most recent stock market bubbles, and you'll find that less than 5% of volume is bought on margin. Speculators don't move markets (they don't have the funds or borrowing power because like you say, they are gamblers), they take advantage of them.

Most people like you look around for someone to hate. Speculators are an easy target.

[NittanyLion]

Pass a law that says that, henceforth, you can only own one home at a time.

I sure hope that's a joke.

[Caramelgal]

Pass a law that says that, henceforth, you can only own one home at a time.

Say what? Are you serious?

Pass a law?

Speculators (the flippers and investors) don’t create the demand. They see a rise or potential rise in demand and jump in while prices are still low enough and demand is increasing enough to make the investment profitable. While a gamble, true speculators know their risks and potential exposure.

Speculation is not necessarily a bad thing. The Western pioneers/homesteaders were speculators. Today’s so called urban pioneers are speculators.

The Gold rush prospectors were speculators and so were the oil drillers. The whole premise of the Stock and Commodities markets is based on speculation.

The free market economy is built on and driven by people willing to take risks and make investments.

As I see it the cause of the housing bubble and its subsequent burst has more to do with people’s unrealistic understanding of basic economics and acceptance of what is affordable. They wanted the big ostentatious house with the big cars in the driveway on a townhouse and compact car salary and were willing to do whatever it took to get it now instead of saving for the future, and buying up over time.

When lenders started coming out with these interest only ARM’s to meet the demand, they were gambling that the borrower’s income and the property’s value would rise proportionately with interest rates. They gambled wrong. But it was the borrowers who made the worst gamble. In many cases they took the, “I’ll worry about that tomorrow” attitude and many didn’t even bother to read the fine print.