Where was Mike Milken when I needed
him? I’m a veritable milquetoast compared to him: my view is simply that
buying a home isn’t always a good idea, especially not when it costs
less than half as much to rent as it does to buy. Milken, on the other hand,
It will be "quite a while before we have a robust housing market again,"
Milken said in an interview today. "The idea that any loan against real
estate is a good loan has never been a rational thought."
The "basic assumption" that home prices will continually increase
is wrong, said Milken.
I don’t necessarily agree with Milken on the subject of real-estate loans:
in general, I think that a real-estate loan with good underwriting – that
is, a real-estate loan where the borrower can repay the mortgage out of his
income – is likely to perform reasonably well. Occasionally, it won’t:
ask any Japanese bank which lent money against commercial real estate in the
mid-80s. And, of course, there’s no shortage of real-estate loans which are
not well underwritten, both in the subprime sector and, more recently,
in commercial real estate. But those are artifacts of bubbles, and I think that
in the grand scheme of things, lending money against property is a good business
to be in. After all, your mortgage is pretty much the last thing you’re going
to default on.