This post was originally going to cover some insights into how and why the tech bubble of 2000 affected the economy so much differently than the 2007-2009 housing crash. However, while researching this comparison it became more appropriate to make an introduction, an unvested plug, of two important emerging thinkers, their blog and their book.

The thinkers are Atif Mian, Economics Professor at Princeton and Amir Sufi, Finance Professor at the University of Chicago. The blog and the book both appear under the name House of Debt.

As New York Times columnist and Nobel Laureate Paul Krugman put it:

Atif Mian and Amir Sufi, our leading experts on the macroeconomic effects of private debt, have a new blog—and it has instantly become must reading.

Krugman understands the importance of keeping up with their work, from a macroeconomics standpoint. But Mian and Sufi’s work has a very industry-specific importance to you, the gatekeepers of California’s real estate, which is apparent in the double meaning of the book’s title.

Perhaps this is best illustrated by the insight that is reached in their comparison between the tech bubble and the real estate bubble mentioned above. Why is it, they ask, the tech bubble that burst in 2000 wreaked relatively little havoc on our economy while the housing bubble sparked a decade(s) long depression?

Go ahead. You can play along.

The answer, according to the dynamic duo, has to do with the distribution of losses. The tech crash only affected those holding large amounts of tech stocks. Thus the losses resulting from the downturn were distributed almost exclusively among the wealthy — those who are sufficiently insulated against such financial blows.

Losses from the housing crash, on the other hand, were distributed across every income bracket, with the majority of the losses being concentrated among the poor. The chart below says it all:


Chart courtesy FiveThirtyEight Economics

Income inequality isn’t just a problem for the poor. A growing majority of Americans are vulnerable to the shock of a housing crash, and through them, the entire economic system.