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To: Ilaine who wrote (91327)	4/7/2001 10:14:38 AM
From: BigBull	Read Replies (5) \| Respond to of 436258

Oh surely, commercial real estate speculation was out of control back in those days, but so was condominium development and the building of sfr's. Every bit as out of control. Speculative frenzy. I don't think commercial real estate deals were causal rather they were coincident. I distinctly remember times when a developer would announce pre-sales on a new development and people would actually line up and sleep out over night on the street to get their unit. It was an article of faith that home prices could only go up and were the best investment the little guy could make. Anybody who rented was considered an idiot. Anybody who challenged these assumptions was openly pilloried. Prices got bid up to extremes as Wall Street went crazy up. Flipping RESIDENTIAL property was wildly in vogue. Guys who did gutter work became general contractors and built 4,000 sq/ft. palaces. It wasn't just S&L's fueling the real estate mania. Every banker wanted to loan on real estate in the Northeast, commercial and residential. Wild huge Wall Street bonuses based on Mikey Milken junk deals and M&A activity brought huge amount of CASH to the bidding up of prices. MBA's straight out of college would think nothing of dropping half a million CASH on some dinky one room Pied a Terre co-op in SOHO. Japanese were paying ridiculous prices for everything. Remember the Japanese Masters of the Universe? So all kinds of projects got funded that never should have - in residential real estate. Prices were bid up way too high based on easy money, Japanese money, bank money and Wall Street money. Not just S&L money. Sound familiar? <g> I'm thinking IPO's, VC, Naz frenzy, Telcom debt. The bubble is burst. The party is over. The easy money is gone. It will take massive amounts of new cash to keep bidding up Ca. real estate prices. GSE refi's may cushion the down for a while.... The Crash was simply one of those Zeitgeist psychological events that signaled the party was over. The huge bonuses stopped. The great liquidity machine was grinding to a halt. Easy money expectations were challenged OVERNIGHT. People were SHOCKED into reality. The Reagan/Rostenkowsky tax deal then also hurt commercial real estate mightiliy and contributed to the bust. The Gulf War energy/interest rate spike induced recession merely completed the process. I do not think this mania was caused and continued ONLY by the S&L industry, although they certainly played a part. I also don't think this mania was driven exclusively by commercial real estate developments built on spec. There was much much more to the story than that. It was also demographically driven as Boomsters were just emerging from college and enetering the home buying market with a vengeance. So when they got done buying there was nobody left to buy when they wanted to trade up. Simply put it was an unsustainable frenzy. Mania's happen in residential real estate, for sure. Mania's always get busted out, always have, always will. It's not if, but when. So California is now faced with a triple whammy: 1. General recession. 2. Energy crises. 3. Massive tech bust, of one of the most spectacular mania's of all time. And the real nasty thing about 1, 2, and 3 is - they are happening all at once. Not spread out over a 6 - 10 year period. Imo the outcome seems pretty inevitable. There is one positive - the fed is lowering rates. This is not trivial. But they also lowered rates after the crash, it was too late to avoid a pretty severe purging of the excesses in the real estate market of the Northeast. That just goes to show that the fed is not the savior people think it is.