Interesting piece in the NYT this morning covering the early 90’s real estate crash. A few years back I put together a compilation of stories from the NYT during this period that illustrated the similarities with the current boom, and now the current bust.
Home Prices Do Fall
A Look At The Collapse Of The 1980’s Real Estate Bubble Through The Eyes Of The New York Times
From the New York Times:
Home Prices Start to Dip, Recalling ’90s Slump
For homeowners in the metropolitan area, all of the talk in the past year about a real estate collapse may have sounded as foreign as a Bollywood musical.
After all, the value of the typical home in the area has more than doubled in this decade. And at the region’s core, the prices of apartments in Manhattan have floated upward on seemingly unquenchable demand.
But lately, more cracks in the housing market have begun to show, and the trend is reminding some analysts of the severe downturn in the region during the recession that followed the boom years of the late 1980s.
Even in Manhattan, signs of weakness have appeared beneath the headlines about ever-rising average sale prices of condominiums and co-ops.
A report last week found that rents in Manhattan declined in January, by more than 7 percent in some neighborhoods, according to the Real Estate Group New York.
The latest set of numbers “reinforces our sentiment that the market has, in fact, turned,” Daniel Baum, the chief operating officer of the company, said in the report.
Economic distress signals are not nearly as widespread as they were in the early 1990s, and economists are still debating whether there will even be a recession this time.
Nonetheless, the long advance and subsequent retreat in house prices in the region bear an eerie resemblance to the rise and fall of two decades ago. It is too soon to tell just how deep the current decline will be. But James W. Hughes, who has tracked the market for homes around New York City through cycles of boom and bust, said he expected it to be worse than — maybe twice as bad as — the fallout from the “real estate bubble” of the 1980s.
Mr. Hughes, the dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said that housing prices in New Jersey rose 145 percent from 1980 to 1988, then fell about 9 percent by 1992.
The pattern for the suburbs in New York and Connecticut was similar, he said. That flow and ebb left people who stayed in their houses during that period with property values that more than doubled, on average.
But the people who bought near the peak in 1988 faced significant losses if they had to sell quickly. Indeed, it took 10 years for house prices in New Jersey to return to their 1988 level, Mr. Hughes said. (Taking inflation into account, the recovery was not complete until 2002, he said.)
“A lot of the pain was felt by peak-of-market buyers that bought in ’88,” Mr. Hughes said. “Those are the ones that really got stuck.”