How the US housing market survived three recessions and two bubbles

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The housing market is one of the most important sectors of the economy, affecting millions of people and businesses. It is also one of the most resilient, as it has weathered three major recessions and two bubbles in the past 40 years. The common theme during each phase was that the housing market was driven by a combination of supply and demand forces, interest rates, income growth, consumer confidence, and policy interventions.

In this article, the team at Homes With M is taking a look at how the housing market performed during each economic cycle, what factors influenced its ups and downs, and what lessons we can learn from history. As the top real estate agent in the East Bay, Mareijke Weidemann offers a unique insight into past housing market trends and how we can leverage this knowledge into monetary gains today. Continue reading to learn more, and feel free to contact us with any questions!

 

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THE EARLY 1980S RECESSION

  • Triggered by high inflation, tight monetary policy, and an oil price shock
  • The unemployment rate peaked at 10.8% in November 1982, the highest since the Great Depression
  • The housing market suffered from high interest rates peaking at 16.63%, which reduced demand and affordability
  • Home prices declined by 3.5% from 1980 to 1982, according to the Case-Shiller National Home Price Index
  • The housing market recovered quickly after the recession ended, as interest rates fell and consumer confidence improved
  • Home prices rose by 32% from 1983 to 1989, outpacing inflation
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THE EARLY 1990S RECESSION

  • Caused by a slowdown in economic growth, a credit crunch, and a collapse of the savings and loan industry
  • The unemployment rate reached 7.8% in June 1992, and consumer spending declined
  • The housing market was affected by a glut of supply, as many homeowners who bought during the previous boom were unable to sell or refinance their homes
  • Home prices fell by 6.5% from 1989 to 1991, according to the Case-Shiller National Home Price Index
  • The housing market recovery was slow and uneven, as some regions suffered more than others
  • Home prices rose by only 9% from 1992 to 1999, lagging behind inflation
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THE DOT-COM BUBBLE

  • A period of rapid growth and speculation in the technology sector, fueled by the emergence of the internet and venture capital
  • Nasdaq Composite Index soared by more than 500% from 1995 to 2000, reaching a peak of 5,048 in March 2000
  • The bubble burst when many dot-com companies failed to generate profits or revenues, and investors lost confidence
  • Nasdaq Composite Index plunged by more than 75% from 2000 to 2002, wiping out trillions of dollars in market value
  • The housing market was largely unaffected by the dot-com bust, as it benefited from low interest rates, strong income growth, and favorable demographics
  • Home prices rose by 82% from 2000 to 2006, according to the Case-Shiller National Home Price Index
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THE GREAT RECESSION

  • The worst economic downturn since the Great Depression, triggered by a global financial crisis that originated in the U.S. subprime mortgage market
  • The collapse of Lehman Brothers in September 2008 sparked a panic that froze credit markets and disrupted trade
  • The unemployment rate soared to 10% in October 2009, and gross domestic product (GDP) contracted by 4.3% in 2009
  • The housing market was at the epicenter of the crisis, as millions of homeowners defaulted on their mortgages or faced foreclosure
  • Home prices plummeted by 27% from 2006 to 2012, according to the Case-Shiller National Home Price Index
  • Housing market recovery was slow and painful, as many homeowners remained underwater or had limited equity
  • Home prices rose by only 23% from 2012 to 2019, barely keeping up with inflation

THE COVID-19 BUBBLE

  • An unprecedented public health and economic shock that disrupted normal life around the world
  • The U.S. economy contracted by 3.5% in 2020, and the unemployment rate reached a record high of 14.8% in April 2020
  • The housing market boomed during the pandemic, appreciating over 27% in just 3 years, as low interest rates, limited supply, pent-up demand, and changing preferences boosted home sales and prices

SO WHAT DO WE CONCLUDE FROM THIS?

  • The housing market has survived three recessions and two bubbles in the past four decades
  • It has always recovered eventually, even after severe downturns or crashes
  • This suggests that real estate is one of the best inflation hedges available, as it tends to appreciate faster than inflation grows over time

The past tells the truth — real estate is one of the best investments you can make, regardless of market downturns, global pandemics, or any other negative factors. If you’d like to take advantage of this opportunity, look no further than Mareijke Weidemann at Homes With M! We offer comprehensive real estate services in the East Bay that can help you take advantage of California’s hottest housing market. Whether you’re selling your home or looking to buy, you can trust our Bay Area real estate agency to make the process fast and easy. Book a strategy call today to get started!

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