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"Bad" Homeowners Can't All Make a Market

You CAN make a mint in the housing market with no income, and no money down. That's what gurus like Robert Allen was teaching people in the late 1970s and early1980s, when that principle actually held.

The reason was that the people you were dealing with on BOTH sides of the transaction, sellers and buyers, were reasonably well financed operators, with the financial wherewithal to perform their roles, thereby giving you a "free ride." Only occasionally would you come upon another freeloader like yourself. And if you did, you'd likely part ways with each other, finding more solid partners.

This leads to something called fallacy of composition. Any ONE (or a small handful) of people can play a "buy and flip" game with inadequate funds. The problem is that they can't all do it. Someone has to be holding the bag at the end of the day, and hopefully that someone has the means to do so.

But when "everyone" (or a large percentage) plays this game, the likelihood that the person left holding that bag won't be able to do so, and will instead default. Thereby bringing donw the whole house of cards.