I don’t know about you, but, having been a renter until June 2000, doesn’t mean I didn’t make occasional forays into the homeowner wilderness.
Timing seemed to work against me. The web didn’t exist in it’s current form in 1986 or 1991, and so the kind of useful information and reasoned opinion that might help to equip one for battle in the market did not exist. Instead you had to rely on the word of a Real-a-tor, which is someone I’d learned had an inherent conflict of interest.
Susan Baretta writes a fascinating piece, after going back into the LATimes archive to read the kind of reporting being done during the last great California R.E. Boom and Bust cycle, 1988-1996, and gives US a little insight, and perhaps a preview, of what you and I have to look forward to in the next decade’s housing market.
I had been aware, since I sold my house in 2005, that something strange was happening in that housing market. I couldn’t exactly put my finger on it, but clearly, the time to sell was ripe.
When I received eight written offers for my house, each one higher than my asking price- this was clearly a feeding frenzy. But the only explanation anyone could fathom was: low inventory.
Having been on the other side of the desk, as a first-time buyer, I was feeling fortunate to be this position. But I also felt genuine compassion for the folks who were insistent on buying, because in my mind they there was no good explanation for this situation they were willingly subjecting themselves to.
And if the roles were reversed, I would have walked.
I couldn’t be certain what the dynamics were, but I knew this could not last. So I made the smartest move I could, and sold- 15% above my asking price.
Since then, when I run into people and the conversation inevitably turns to housing, I am surprised some still hold to the opinion that real estate will always appreciate / be a good investment / always go up.
Yet, my own experience tells me otherwise.
Defaults are at twenty year highs, as are foreclosures.
And something more, which has never happened before: bond markets are being hit really hard by defaults on mortgages resold as securities.
Plus, there is palpable fear that all this could eventually lead US into a recession- or worse.
How short memories are.
In the 1980’s, Texas crashed hard. Mansions in Houston and Dallas could be purchased for $80,000, or less- and if you could find a job there, great. California was still sprawling, even out into the high desert, and people actually were buying homes there- for awhile.
Around 1991-ish, in one of those really awful Lethal Weapon movies, an entire unfinished housing tract in Palmdale (or was it Lancaster?) was burned to the ground. This wasn’t CGI magick; the producers paid the developer of an actual failed housing development for the pleasure. Apparently unfeasible as homes, dozens of houses, most in the framing stage, some with roofing completed and some nearly finished, were torched- legally- rather than completed and sold as homes for families that might have liked an affordable place to live.
Such waste! And yet, people seem to forget that the housing market, just like the stock market, is subject to cycles of feast and famine.
And of course, a number of experts were quoted saying the market was bottoming. One realtor likened the market to a junior high school sock hop, with buyers standing against one wall and sellers standing against the other wall, and everybody was just waiting for a few brave couples to venture out on the dance floor.
That was said way-back in 1990.
It should be obvious to you where we’re heading.