My favorite economics reporter, Jonathan Lansner, just did an article in the Orange County Register that looked at two periods in recent (well recent for those of us old enough to remember the 1980s!) history where we saw zero appreciation in the California real estate market. Everyone thinks about the crash of 2008 but Lansner goes back and looks into the 1990s and finds similar woes.
According to the article, "In May 1991, the statewide median sales price of a single-family home hit a record $211,000. It would take almost eight years for a new record to be set at $212,300 in March 1999." By comparison, of the crash we remember, he says, "By May 2007 – a little over eight years since the 1990s debacle ended – the statewide median had set a new pinnacle at $594,500. That’s nearly triple from the last crash’s end. However, in mid-2007, easy mortgages disappeared, leaving behind a wave of foreclosures. The world’s financial markets bet heavily on those risky home loans. And when those mortgage bets imploded, so did the global economy in 2008. California housing got clobbered. In less than two years – in February 2009 – the market bottomed with a $245,200 median. That’s a 59% drop. Yes, 59%."
All other times since 1990, the California median price surged at an average 10% annual rate. This year it’s up just 2% in the first five months.
Lansner ties the crashes to employment and jobs numbers and makes a solid case for the reason our market is just slow and not crashing. He says it is because our current unemployment rate is just 5.3%. Per Lansner, "Joblessness averaged 7.8% in the 1990s crash. It was 8.3% in 2007-2018. And all other times since 1990? Just 5.8%." This makes sense to me.
Excellent reporting (I am fan-girling here!) and fabulous insight into what we are seeing in the market. Be sure to read his entire article through the link above if you want more specifics.
