Take a trip into the past to understand Today’s market.
The simple fact is, as much as we would like to pretend we are in a new type of recession, America and the Real Estate Market have been here before and likely will be here again sometime in the future.
Knowing this to be true, let’s take a look at a few facts from the recessions of old and even the Great Depression. First, to paraphrasea 97 year old Realtor from Seattle, compared to the Great Depression this is a cakewalk, this is even an easy recession compared to the recession of the 1970′s. The fact is, during the Great Depression (which lasted over 10 years) unemployment remained at a 30% rate, causing housing prices to fall and homeless rates to increase like never before or since. Today although the housing prices have fallen, Unemployment remains under 10% and homeless rates have not seen dramatic increases, although the number of people renting have increased.
The Great Depression ended with the end of World War II, where housing pricing saw sharp increases, a trend that continued throughout the 1960′s and into the early 1970′s.
During the 1970′s inflation rates were as high as 6% and interest rates reached a record level of 21% while unemployment ran between 8-15% throughout the decade. High inflation rates and extreme interest rates set the United States up for what was often called the worse crash of the Real Estate Market which took place in the 1980′s.
Much like today foreclosure rates tripled in the mid 1980′s as the Fed began to correct the high interest rates. Much like what we see today due to inflated pricing, in the 1980′s homeowners were underwater with home mortgages because of high interest rates which caused this sudden increase in the foreclosure market. The flood of foreclosures caused housing prices to slide, a trend which continued into the early 1990′s.