The asking prices now are about one-third less than they were three years ago. Up and down Sunset Boulevard in West Hollywood, apartment houses that were converted to condos lie empty, boarded up, not one unit sold, in bankruptcy, with banks holding title…
The Southern California residential real estate boom … was not just a boom. It was a superboom… Every day, home buyers would look at the prices and say, ”It can’t go on.” But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ”But the rich will always be able to buy.” Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ”Never mind, the music business people will buy anything.”
[The] brokers said, ”The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.”
Then the music stopped…
A familiar litany of our times, no doubt.
Yes … and no. The passage above was published in December 1984 in The New York Times, entitled The Day Los Angeles’s Bubble Burst. Written by Ben Stein, the multi-faceted writer, actor, economist, game-show host, etc., it was intended as a warning to complacent New Yorkers that the housing crash of that era could indeed visit them as well.
Now it serves as a cruel mirror mocking the complacency and greed of contemporary Californians who forgot or ignored the lessons of the not-so-distant past. And if the overinvested among us, who feel bitterly betrayed and disappointed by their recent reversals of fortune in real estate ventures, protest that the oracle from the ’80s was too distant a memory, we would remind them that history repeated itself once more, for the benefit of those who managed to miss the point earlier, in the ’90s.
I happened on Stein’s article one night a few months ago when a chance scattering of search terms shook it loose from Google’s grasp. Amazed by his prescience, I located Stein’s email address – again, through Google’s democratic magic - and dashed off a note into cyberspace, not knowing if I would be honored with a response.
I reminded Stein of his 23-year-old article, and asked if he had any thoughts about its relevance to today’s real estate market.
Just a few hours later I received an ominous reply, the more so for being so terse: “This one will be a lot worse.”