Free The Greatest Trade Ever by Gregory Zuckerman Page A

stainless-steel appliances, flat-screen televisions, and surround-sound systems. Borrowers often asked for loans much larger than they could afford, sometimes exaggerating their salaries and other financial information to qualify.
    The real estate market became the hobby that swept the nation, extended around the globe, and then back again. Reflecting the speculative frenzy, reality television shows debuted, including
Flip That House
and its competitor,
Flip This House
. Even the upper echelon got carried away. In the spring of 2004, Lakshmi Mittal, an Indian steel magnate, bought a twelve-bedroom house with a twenty-car garage in Kensington Palace Gardens, London, for an eye-popping $126 million.
    Investors like Jeffrey Greene also drove prices higher. Greene, an old friend of John Paulson, had a voracious appetite for real estate in the early 2000s, purchasing hundreds of apartment buildings in Southern California, often at a rapid-fire clip. Greene never asked for a commission from real estate brokers bringing him deals, unlike some of his competitors. Instead, he hoped to be their first call when a new property came on the market. Because he had done so much buying, Greene became familiar with wide swaths of the San Fernando Valley and Hollywood. Within five minutes of getting a new offer for an apartmentbuilding or a home, Greene usually agreed to a deal at full price, forgoing time-consuming negotiations or inspections so he could be the first in the door.
    “I could tell within five minutes, just from a phone call, if it was a good price,” Greene recalls. “I knew the streets, I knew the rents, and I could picture the buildings. The brokers knew what I wanted.”
    By 2005, lenders had granted $625 billion of subprime loans, a fifth of all home mortgages that year, according to
Inside Mortgage Finance
, a trade publication. U.S. home prices had jumped 15 percent in the previous year and were on average almost 2.4 times annual incomes, compared with a seventeen-year average of about 1.7. 8
    Bulls were convinced that prices would continue to trend up, noting that homes hadn’t fallen on a national basis in generations. A flattening of prices was as bad as it had gotten since the 1930s. Many experts at most conceded there might be bubbles in some local markets.
    A December 2004 interview with Countrywide’s Angelo Mozilo on the
Kudlow & Cramer
show on the cable-business network CNBC captured the tenor of the times:
    LARRY KUDLOW, COHOST:
Mr. Mozilo, again, happy holidays to you
.
    MR. MOZILO:
Thank you
.
    KUDLOW:
You can’t see it, sir, but underneath you, it says “bubble shmubble,” which has sort of been our view … People buy homes, ’cause they like to and they can afford to. And …
    CRAMER:
Right
.
    KUDLOW:
 … homes are in short supply relative to demand
.
    MR. MOZILO:
Right
.
    KUDLOW:
Are you in the bubble shmubble camp?
    MR. MOZILO:
No, I’m probably in the bubblette camp to be honest with you.… There’s a few areas of the country where we have some inventory, but on balance, as you said, Larry, the demographics are clear, there’s tremendous demand for housing, and it’s becoming more and more difficult to build housing and to get land and title than the capital that’s needed to do it.… And so I think that we’re going to have a very healthy housing market
.
    CRAMER:
I have a quick question to ask Angelo. Angelo, fifty-one years
.
Did you get into the housing business when you were, like, eight?
    MR. MOZILO:
Fourteen, right—not far from you. I was in 25 West 43rd
Street, fourteen years old, as a messenger boy
.
    KUDLOW:
That’s a great story.…
    MR. MOZILO:
It’s a great country
.
    CRAMER:
Yeah, it is
.
    KUDLOW:
Number one
.
    CRAMER:
It’s a great American story
.
    KUDLOW:
And earnings look great
.
    MR. MOZILO:
It’s a great country
.
    KUDLOW:
Share looks great
.
    CRAMER:
Yeah
.
    KUDLOW:
No, really, it’s a wonderful American story
.
    CRAMER:
It’s a great