The Housing Market in the 90s

The 1990s experienced early years of recession and a housing downturn, followed by boom years for housing and the economy.

The housing market has always been cyclical, but over many decades, the value of most homes increased. When a recession or other events created housing difficulties, homeowners and buyers could wait out the time until the situation improved. This pattern of ebb and flow in housing lasted until the first decade of the 21st century, when additional factors caused the system to break down. Recession and resurgence during the 1990s is a prime example of an era of a housing trough and recovery.

The Housing Market in the 1980s

The 1980s experienced a housing boom, including new retirement communities in sunbelt states like Florida, Nevada, and Arizona.

The 1980s experienced a real estate bubble. These were boom years. On average, housing prices rose 145 percent from 1980-1988 in the New York metropolitan area, Connecticut and New Jersey. Other areas of the country experienced housing increases, although not quite as large as the New York area. New housing skyrocketed, new communities sprang up, families bought their first homes and many people bought second homes. The housing euphoria lasted until recession hit the country in the early 1990s.

The Early 1990s

Layoffs, few new jobs and recession brought the housing boom to a screeching halt in the early 1990s.

The recession took a toll on the housing market throughout the country. Housing prices dropped 9 percent by 1992 in the New York metropolitan area. Job layoffs, rising unemployment and a poor job market badly damaged the housing market everywhere. Housing construction declined nationally 12.9 percent in 1990, and an additional 16.7 percent in 1991. Prices declined for more than four years before hitting bottom. California prices declined 25% during the recession years. It took ten years for housing prices in New Jersey to return to their 1988 pre-recession highs. Housing prices did not recover until 2002, when inflation is figured into the formula.

The Boom Years

The mid-1990s saw an economic resurgence. The impetus to the economy's recovery was a technology boom. This was the era of new electronics and computers. There were cell phones, desktop and laptop computers, the Internet, electronic games, new TV devices and huge advances in business technologies. The housing industry was a benefactor of the surging economy. Prices began to rise again by 1996. The rate of home ownership during the 1970s, 1980s and the first half of the 1990s averaged 64.4 percent. The rate began to rise in 1995, peaking at 69.2 percent in 2004. New housing rebounded. The economic turnaround brought California -- hit especially hard by the recession -- along with the rest of the nation, out of recession and into a technology boom era. California had the best housing year in a decade in 1997.

The 21st Century

The housing boom lasted through the first half of the first decade of the new century. Following that, the worst recession since the Depression battered the country. The housing market fell apart, and the foreclosure debacle of the 2000s made the situation far worse than the 1990s housing bust. There was not a large quantity of subprime mortgages and home equity loans maxing out people's equity and expenses in the 1990s. The subprime mortgage industry totaled $35 billion in 1994, and the number rose to $330 billion in 2003 and $600 billion in 2006. Prices plunged to an unprecedented level, as people could not afford to pay their mortgages. As home prices careened downward, people were underwater with their mortgages. They owed more than their homes were worth. Housing market practices were a major cause of the economic turmoil of the decade. It took ten years for the hardest hit housing areas of the 1990s to recover; it will take even longer for some areas to recover from the housing and economic crisis of the 2000s.

References

• "New York Times"; Home Prices Start to Dip, Recalling Slump of the 90s; Patrick McGeehan
• "Business Week"; After the Housing Boom; Kathleen Madigan
• Seeking Alpha: S&P/Case-Schiller April 2009 Housing Results: Current Bust Dwarfs 90's Tumult
• "The Daily News"; Housing Market Booms; California Sales, Prices at '90s Peak; Gregory Wilcox
• Track the Stimulus: Housing Statistics
• "In These Times"; The Subprime Bait and Switch; Alexander Gourse

Resources

• American Public Media Marketplace: Comparing housing in the 90s and today