The Great Crash 10 Years Later

irvinehomeowner

Well-known member
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?
 
I have officially shorted the S&P 2 weeks ago. Purchased SH and gonna hold on for the ride down.
 
irvinehomeowner said:
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?

The dot.com bust was in 2000, not in the 90's and houses went UP at that time not down. Greenspan kept lowering rates in attempt to stop the stock market crash but it didn't really help much.


Stock market crash of Oct. 1987 didn't coincide with housing going down either. That market peaked in mid 1989 at which times stocks had bottomed out and were recovering.
 
irvinehomeowner said:
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?

I think sell off is in effect for profit taking. People then stash it under mattresses or put it in a safe low yield saving accounts now that rates has some earning. Then wait for potential deals ahead. In the end real assets is better to hold than some numbers on some accounts. At least you can feel it, touches it and / or live in it.
 
Compressed-Village said:
irvinehomeowner said:
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?

I think sell off is in effect for profit taking. People then stash it under mattresses or put it in a safe low yield saving accounts now that rates has some earning. Then wait for potential deals ahead. In the end real assets is better to hold than some numbers on some accounts. At least you can feel it, touches it and / or live in it.

Yes . Real estate is among the most versatile assets ? broad range of utility ? can be lived in , can generate income when needed , can provide collateral when needed , can be used to show off to your friends when needed

Try doing all that w gold . Or with stocks .

That versatility in and of itself creates an option value which markets miss.

Disclaimer ? this is NOT a comment on the attractiveness of the RE market valuations at this particular point in time , more of a general , ?structural ? , argument
 
fortune11 said:
Yes . Real estate is among the most versatile assets ? broad range of utility ? can be lived in , can generate income when needed , can provide collateral when needed , can be used to show off to your friends when needed

Try doing all that w gold . Or with stocks .

With smartphones, social media, and financial apps these days it's very easy to show off your portfolio to friends and strangers.  Some apps even have a "balance peek" option where the balance shows without having to login!  ;)
 
woodburyowner said:
fortune11 said:
Yes . Real estate is among the most versatile assets ? broad range of utility ? can be lived in , can generate income when needed , can provide collateral when needed , can be used to show off to your friends when needed

Try doing all that w gold . Or with stocks .

With smartphones, social media, and financial apps these days it's very easy to show off your portfolio to friends and strangers.  Some apps even have a "balance peek" option where the balance shows without having to login!  ;)

Agree.  Hell , people show off their portfolios on TI ? only the successes , mind you :) 
 
Ready2Downsize said:
The dot.com bust was in 2000, not in the 90's and houses went UP at that time not down. Greenspan kept lowering rates in attempt to stop the stock market crash but it didn't really help much.


Stock market crash of Oct. 1987 didn't coincide with housing going down either. That market peaked in mid 1989 at which times stocks had bottomed out and were recovering.

Thanks for the history clarification R2D.

Anything beyond 20 years all happened at the same time to me. :)

So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?
 
The 90's RE crash coincided with the Junk bond crash and the Savings and loan crash.  Both paralleled our recent financial crash.  Then the government created the Resolution Trust Corp that our most recent Troubled Asset Relief program paralleled and put in the bottom needed to fuel our new recovery and boom...it'll all happen again, it is our destiny.
https://youtu.be/G6b5ubvfa3I

https://youtu.be/G6b5ubvfa3I
 
irvinehomeowner said:
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.


 
There is correlation and there is causation

Correlation means when a bunch of different things happen at the same time - real estate slowing down, corporate bond market selling off , increase in defaults . Same as the saying ?misery loves company ? . This is essentially what historical financial analysis of markets gives you and what 99 percent of supposed economics and financial experts make their living off of


Causation is when you can link certain pieces together ? and say that ?x happened alongside y AND x caused y ? . This is much much harder to prove . This is why economics is not really a science unlike physics or math where laws of thermodynamics work in every single instance and very predictably

My goal is not to sermonize here ? but Steve Jobs once famously said - you cannot connect the dots looking forward , can only connect the dots in hindsight .

Maybe you can . But it is Damn hard connecting dots in hindsight when it comes to finance and economics

Certain obvious truths are

Leverage is a self fulfilling cycle

When the monetary authority drains liquidity , something always breaks

Reserve currency status (which is the dollar)  means a whole LOT

A move towards insular markets (less trade ) may boost short  term prospects but is always productivity destroying a few years out


 
lnc said:
irvinehomeowner said:
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.

Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

 
Mety said:
lnc said:
irvinehomeowner said:
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.
Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

Around $1800 for $210k mortgage.  $1800 was not much by today?s standard but that was a big deal for me back in 1994 and I was just started working with a tiny starting salary. 
 
lnc said:
Mety said:
lnc said:
irvinehomeowner said:
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.
Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

Around $1800 for $210k mortgage.  $1800 was not much by today?s standard but that was a big deal for me back in 1994 and I was just started working with a tiny starting salary.

In 1999, I had a mortgage of 270K @ 8.75 my mortgage was 2200 with no PMI, I nearly faint when signing my mortgage shackles Imagine that.
 
Compressed-Village said:
lnc said:
Mety said:
lnc said:
irvinehomeowner said:
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.
Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

Around $1800 for $210k mortgage.  $1800 was not much by today?s standard but that was a big deal for me back in 1994 and I was just started working with a tiny starting salary.

In 1999, I had a mortgage of 270K @ 8.75 my mortgage was 2200 with no PMI, I nearly faint when signing my mortgage shackles Imagine that.

Let's put those numbers in today's inflation standard.
Those numbers $1800 in '94 or $2200 in '99 will result around $3200 by 2018's inflation calculation. Now with a current interest rate about 4.5% with 20% down payment, a $850k home will have $3200 mortgage payment. So your 8% or 9.5% interest rates back then are not so crazy numbers if you compare with today's inflation.

Now the question is - has the home price gone up too far or is it the interest rate that's risen too high? Or both? Or does everything sound reasonable to you as of now?

 
Mety said:
Compressed-Village said:
lnc said:
Mety said:
lnc said:
irvinehomeowner said:
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.
Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

Around $1800 for $210k mortgage.  $1800 was not much by today?s standard but that was a big deal for me back in 1994 and I was just started working with a tiny starting salary.

In 1999, I had a mortgage of 270K @ 8.75 my mortgage was 2200 with no PMI, I nearly faint when signing my mortgage shackles Imagine that.

Let's put those numbers in today's inflation standard.
Those numbers $1800 in '94 or $2200 in '99 will result around $3200 by 2018's inflation calculation. Now with a current interest rate about 4.5% with 20% down payment, a $850k home will have $3200 mortgage payment. So your 8% or 9.5% interest rates back then are not so crazy numbers if you compare with today's inflation.

Now the question is - has the home price gone up too far or is it the interest rate that's risen too high? Or both? Or does everything sound reasonable to you as of now?

Forgot the most important fact:
$210k from ?94 or $270k from ?99 home price should be around $400k in 2018?s inflation.

 
rickr said:
I have officially shorted the S&P 2 weeks ago. Purchased SH and gonna hold on for the ride down.
Very good move... it wont be the slaughter of 07, but there is money to be made now on the shorts.
 
OCAgentGold said:
rickr said:
I have officially shorted the S&P 2 weeks ago. Purchased SH and gonna hold on for the ride down.
Very good move... it wont be the slaughter of 07, but there is money to be made now on the shorts.

Funny thing is everyone I talk to still thinks we have 1-2 years of a bull market to go. I don't believe it. My company does business with a lot of top tier OEM's across all industries. Business has completely dried up on the commercial front. Especially that big "fruit" company (We are not allowed to use their name). Aerospace/Defense work is still strong but that is only because Defense budget has expanded so much and Tier 1 OEM's are trying to get it while the business is still there.

Housing Market Softness + Inflation + Rising Rates + Tarrifs + Trade Wars + Crazy President + Corporate Debt + .... = Strong Recession

I guess I must be crazy. 10 year bull run has to eventually end. Sorry, not trying to be schadenfreude but expressing my opinion.



 
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