Are we experiencing a Repeat of “The Great Depression?”
(I mentioned in Part 1 I would keep the history portion short. I must apologize because when I began to study The Great Depression to look for similarities with what we have just experienced and any tell tale signs of what we might expect in our near future; I found so much information to share, it is going to push my final answer to the pressing question: “Is this the End of Buying Homes as an Investment in Orange County, California” on to additional segments. I do, however; believe that you will find this section most interesting. To keep it as short as possible, I’m pulling some of the more meaningful quotes and linking you to the entire article if you should choose to read the material from that source further. I also want to recommend to you that you see the movie/documentary “INSIDE JOB” for further insight into how our current situation developed.)
The actual period of time considered “The Great Depression” is vague; but appears by most resources to have lasted at least 11 years and it appears there were at least two additional recessions during that period of time. That was the most surprising factor for me in my determination of what we might expect from whatever this is that we’re currently experiencing. For an interesting and more informative overview in layman’s terms, of The Great Depression, visit http://ingrimayne.com/econ/EconomicCatastrophe/GreatDepression.html. What I gained from this report, among many other things, is that the difference between a recession and a depression appears arbitrary. (In years to come, will we determine what we are currently experiencing to be another great depression?) Notice, the article specifies an unemployment rate of 10% as a differential; but states that one in four were out of work. I would venture to say that given the number of underemployed, we might be matching that number.
This particular housing rush began in 1998 and ran into mid-2006. The depression began in 1929 and officially ended 19__ ; well, there really is no date specific; as results there-from ran well into the 1950s. In fact, it wasn’t until the 1990s when books were written suggesting home-buyers move away from what was referred to as ‘depression era thinking’ and toward home leveraging (letting the banks carry your risk). Are those books and the systems they suggested the reason for our current problems? I highly recommend the movie/documentary “INSIDE JOB.” I believe it clearly suggests this way of thinking was the cause of the ‘housing rush’ and many believe the ability to make money in the housing market has passed, never to return again. If we had our crystal balls, only then would we know for sure. However, in Orange County, California there have been three times in the second half of the 20th century when housing prices peaked each time at a new high only to fall down just as quickly as it increased. What’s important for you to recognize is at no time in our history has the value of homes fallen never to rise above the last highest level. Isn’t this statement surprising? I could have sworn I heard the media say ‘never again’ … ? Only IF the market should begin to go down again, and that is not expected in this part of the country, could there be a better time to buy property or relocate to Orange County, California. On this; however, I place a caveats. Please continue reading to Part 3 of this entry to see why. And, be sure to sign up below to receive notice of when the next part(s) are published.
I also invite you to visit: http://en.wikipedia.org/wiki/Great_Depression wherein it states: “Even after the Wall Street Crash of 1929, optimism persisted for some time; John D. Rockefeller said that “These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.” In fact, the stock market turned upward in early 1930, returning to early 1929 levels by April. This was still almost 30% below the peak of September 1929. ”
I also found this slightly ominous correlation:
According to the website: http://www.forecast-chart.com/great-depression-stock-chart-nl.html, “there is a disturbing correlation between the NASDAQ Composite index since 1989 and the DJIA during 1920-1943. Each period experiences a boom, bust and a partial recovery followed by another bust of surprisingly similar magnitude, slope and duration.”
I don’t mean to suggest that the housing market follows or does what the stock market does; because it doesn’t. I mention this only as to how it ties in with previous trends in the late 1900s as regards to Real Estate in Orange County, California; and as a hint that this might not be over yet. In addition, I found the following most interesting:
Turning point and recovery
The overall course of the Depression in the United States, as reflected in per-capita GDP (average income per person) shown in constant year 2000 dollars, plus some of the key events of the period.
Various countries around the world started to recover from the Great Depression at different times. In most countries of the world, recovery from the Great Depression began in 1933. In the U.S., recovery began in the spring of 1933. However, the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933.
There is no consensus among economists regarding the motive force for the U.S. economic expansion that continued through most of the Roosevelt years (and the 1937 recession that interrupted it).
The common view among mainstream economists is that Roosevelt’s New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt’s words and actions portended. However, opposition from the new Conservative Coalition caused a rollback of the New Deal policies in early 1937, which caused a setback in the recovery .
Don’t let my comments detour you from meeting with me to discuss whether you are able to qualify to buy a home, or if it’s time to sell your existing one. You can visit my website by clicking here. I’d love to hear from you on your opinions in the comments section. Again, don’t hesitate to sign up below to receive an email notice for future parts of “Is this the End of Buying Homes as an Investment in Orange County, CA?”.