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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: JF Quinnelly who wrote (17548)2/19/2004 9:31:01 PM
From: Elroy JetsonRead Replies (2) of 306849
 
The Myth: The defense industry here was downsized dramatically back around 1990, it's what gave us our last RE bust.

Real estate prices declined nationally in 1990 placing many banks and savings and loan into receivership.

Real estate boosters in Los Angeles have created a ridiculous myth that this national catastrophe was caused by the loss of 35,000 aerospace jobs in Los Angeles and an additional 70,000 jobs lost in related spending. Talk about an egocentric world view!

economicrt.org

In a metropolitan area with a population of 18 million the impact on real estate prices from 105,000 lost jobs is going to be negligible at best. Globalizing this into the reason the last real estate price bubble collapsed is a comedy that could keep one amused all evening.

It is fair to say that the loss of defense industry jobs from 1987 to 1991 did contribute in a very small way to the decline in Southern California real estate prices.

This has been a pet peeve of mine since this preposterous idea first gained currency. It's somewhat akin to blaming the collapse of the real estate price bubble on space aliens. This pleasant fiction makes some real estate owners feel more secure against the backdrop of our current real estate price bubble.

Our current bubble will collapse of its own weight just as the Los Angeles real estate bubbles of 1885, 1925, 1965, and 1990 did. Just as the Internet stock bubble did. You simply reach a point when the last of the sucker buyers have bought and sentiment changes.
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