I remember the 1995 real estate doldrums well. It was brutal!
Interestingly, there were suburbs in CA that had literally boomed around residential real estate over the previous four years, just like old-west mining towns boomed in the 1800s.
The towns boomed with title, escrow, real estate, remodeling/design, contractors, staging, photography, appraisal, and mortgage companies, seemingly filling every office and storefront.
When rates rose and real estate died, the towns died too. Towns like Danville, CA, felt like ghost towns; there was palpable malaise, as everyone – used to easy money – seemed to give up entirely on generating business.
So many people threw in the towel, though, that opportunities surfaced for those who didn’t.
On the mortgage side (with both purchases and rate-and-term refis dead), I remember seeing people cultivate niches with BK bailout loans, bank turndowns, low-rate ARMs, and cash-out mortgages for contractors with cash-flow issues (there were a lot of them).
The Slowest Market in 40 Years
But this is what is interesting: Today’s market is even slower than 1995’s brutal market in relative terms. Today’s market is also even slower than the notoriously slow 2008 and 2011 markets.
To be sure, we’ll see more total transactions this year (around 4.65 million, vs. 4.5 million in 1995, and 4.6 million in 2008, and 2011).
But what analysts often miss is that we have substantially more people today.
So, from a transactions-relative-to-population perspective, this is the slowest market in 40 years.
And yes, for the I-walked-ten-miles-to-school-uphill-both-ways-crowd, the early 1980s were even slower – with only 10+ transactions per 1,000 people.
But, compared to more recent busts, today is terrifyingly slow, as we’re averaging about 13.6 transactions per 1,000 people – compared to 14.7 in 2011, 15.1 in 2008, and 16.8 in 1995.
In addition, the early 1980s downturn was relatively short-lived. Today’s sluggish market has been dragging on for several years now.
There is a table (thank you, Claude) at the bottom of this blog that sets out the data.
Conclusions (The Usual):
- If you’re surviving this market, consider yourself lucky. If you’re thriving, consider yourself godlike.
- Cultivate niches.
- Ensure your sales and marketing efforts, and service levels are polished to perfection. This is painfully cliché, but a worthy reminder, nonetheless, as we all get sloppy.
- Realize there is no easy money.
- Look forward to the good times to come, as today is definitely not normal.
- If you’re in real estate, be glad you’re not in mortgages.😊 This is because the mortgage industry is suffering from a dearth of both purchases AND refis (expect to see a lot more mergers). (I might add here that JVM’s doing just fine, as we fortunately follow our own advice).
