Some "Deja Vu" Housing and Lending Data That Should Make You Feel A Bit Better Today

I read Renee Burrows blog this AM, So Why is Everyone Telling Me the Party is Over and I Need to Turn Off the Lights & Leave? and I was really inspired.   

Here is a dedicated, smart agent, who missed out on the boom here in Las Vegas but who is staying "positive and upbeat" in spite of the incredible down cycle we are in here.  

And she is right!!   Please look at this data and read these headlines from those years in Southern Califonia, which often mirrors the hot and cold real estate markets of the time. 

Check out the interest rates during those times.  And also keep in mind how many creative loan programs we had in those years.    You are going to get a sense of deja vu when reading.

The history I am listing here is from http://www.rntl.net/history_of_a_housing_bubble.htm and http://marinrealestatebubble.blogspot.com/.

The interest rates come from the Freddie Mac website.

1985-1986: Housing is booming, inventory is low.

30 YR INTEREST RATES: 10.000%-13.000% PLUS 2.5 POINTS

1987: Housing still booming, prices increasing, inventories low.

30 YR INTEREST RATES: 9.00%-11.000% PLUS 2.1 POINTS

1988: People start to question the boom. Realtors assure us the boom will continue. Houses aren't like stocks afterall.

30 YR INTEREST RATES: 9.89-10.600% PLUS 2 POINTS

1989: Prices are very expensive; affordability an issue. Sales slow and prices drop. Mention of risky loan types.

30 YR INTEREST RATES: 9.75%-11.05% PLUS 2.1 POINTS

1990: Prices take a serious plunge. One article claims that housing booms are a bad thing and we should hope prices stay low. Increasing mortgage rates are blamed for the bust. The word "recession" is mentioned. Gloom and doom. 

30 YR INTEREST RATES: 9.67%-10.480% PLUS 2 POINTS

1991: A "dead cat bounce"? Some folks wondering if the bust has bottomed out or not. Sales are abysmal (e.g., -42%). Other parts of the country showing some signs of recovery. 

30 YR INTEREST RATES: 8.500%-9.640% PLUS 2 POINTS

1992: No one is buying; housing is an investment that no one will touch. Desperate political efforts being made to encourage house buying. Rock bottom prices and lower mortgage rates encourage some purchasing. The year ends with some buying. Another "dead cat bounce"? It's not clear.

30 YR INTEREST RATES: 7.92%-8.94% PLUS 1.7 POINTS

1993: It's definitely a buyer's market. Some people are saddened by the fact that current prices are 50% of what they were in the 1980's. The housing bust in Southern California is clearly negatively impacting the California economy and the national economy at large. Sellers are desperate to sell (and some people taking extreme measures like putting huge "for sale" signs on their lawns for passing planes to see). Folks who waited out the boom to buy at the bottom are being handsomely rewarded for their patience. Proof-positive of the contrarian investing style -- be greedy when everyone is fearful and fearful when everyone is greedy. The "slump" may be ending. 

30 YR INTEREST RATES: 6.83%-7.99% PLUS 1.7 POINTS

1994: Housing begins its comeback. People who had the intelligence to wait for the bottom are buying now at great values. Even rising mortgage rates are not shaking the recovery. 

30 YR INTEREST RATES: 7.07%-9.20% PLUS 1.8 POINTS

1995: Some parts of the Southland are recovering others are not. People with "negative equity" are in despair.

30 YR INTEREST RATES: 7.20%-9.15% PLUS 1.8 POINTS

1996: A tentative recovery is still in the making.

30 YR INTEREST RATES: 7.03%-8.32% PLUS 1.7 POINTS

1997: Finally, housing has recovered. 

30 YR INTEREST RATES: 7.10%-8.14% PLUS 1.7 POINTS

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2007 INTEREST RATES?  6.22%-6.70% WITH O.4 POINTS

The bottom line...real estate is cyclical.  Those headlines, from a 10 year period above, sound very similar to the headlines of the last 10 years.   Stay focused, stay positive, hang in there and do what you can to survive the cold.     The heat wave may be away in the distance but you can be assured it's coming.