To get started, let’s stipulate that the Great Housing Boom of the past decade was not a housing boom–it was a speculative debt-fueled bubble which happened to occur in the asset class known as real estate. As a speculative bubble, it shares the same characteristics as other speculative manias in tulips, stocks, toilet paper, etc.

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KANSAS CITY, Mo., Aug. 17 - As we disclosed previously, the tighter guidelines and adjusted pricing we have adopted will reduce loan originations until the secondary market shows signs of normalizing. This reduction in force includes stepping back temporarily from pursuing new loans in the wholesale market, a decision we are also seeing among some of our peer companies. For now, we believe this is the right thing to do economically. Our retail channel will be the dominant source of new loans in the coming months. We will follow through on the funding of loans already approved through the wholesale channel."

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It’s time for an update on the real estate bubble, which I have been watching since 2003. About a year ago, I laid out a timeline for the real estate boom. Knowing real estate happens in 16-year cycles, I juxtaposed the last boom/bust cycle in the early 90’s onto this cycle. Here’s what I came up with:

1990 (2007): Prices take a serious plunge. One article claims that housing booms are a bad thing and we should hope prices stay low. Increasing mortgage rates are blamed for the bust. The word “recession” is mentioned. Gloom and doom.

That’s next year. How many times do you think you will hear the words “looming recession” next year? More than you want to, that’s for sure…

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Michael Strauss, the founder and chief executive of American Home Mortgage Investment (AHMIQ), has faced a swarm of problems in recent months. One of the biggest, fastest-growing mortgage lenders in the country, its shares had slipped from a high of $36.40 last December to $10.47 by late July as the housing crisis deepened.

On July 31, things got decidedly worse. After the Melville (N.Y.) company announced that it would delay its dividend amid growing cash woes, panicked investors fled, sending the shares tumbling $1.04 by the end of the day. Six days later, American Home Mortgage filed for bankruptcy in Delaware (see BusinessWeek.com, 7/30/07, "American Home’s Credit Crisis").

Now, could Strauss potentially face civil insider trading charges as well?

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