The Day California’s Real Estate Bubble burst

California’s Real Estate obsession has a long History

Here is a interesting article from the LA TIMES printed in 1984– yes you read that right -1984.  It tells a lesson to be learned. A lesson of California’s obsession with real estate whether buying their own home or investor speculation.

Of course in 1984 -things were much different – interest rates were still plus 10%, Reagan was in Charge, Cold War still raging- but the one constant is how obsessed with Real Estate California was  .  A terrific qoute from this article is:

The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million.

Hmm this sounds all too familier. For that crappy santa monica bungalow to go from 40k to 400k in 6 years- a 10 fold increase- is crazy.  But it also shows where many parents origianlly got their feet wet and aquired the real estate bug thats has passed on to future generations.

The article goes on to state how the boom ended:

The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason.

Now, four years later, those brokers who are still in the game tell sellers to expect that their houses will be on the market for two years. Other brokers have sold their BMW’s and are now working as ”financial planners” or public-relations people, dreaming of the days when they worked for 6 percent of infinity.

read whole article here

What has happened since then?  As we know California had another boom in mid late 80’s followed by a huge bust in early mid 90’s then followed by our infamous boom and bust in recent years.    What has happened -will happen again.

Despite the FED and goverment doing everything in their power to reflate the boom right now- there seems to be a overall shallow feeling to this latest fed fueled /inventory restricted -mini-boom.

One thing is certain – How many 24-35 year olds are buying that 400k entry level home in a questionable area on declining wages right now?   Not too many.

If you Seperate the flood of foreign investors and the families that have had their inflated estates passed down -along with low prop 13 property taxes – what do you really have?

History repeats itself.

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