“This isn’t 2008!”
It’s a standard chorus from actual property gurus when speaking in regards to the fragility of California’s housing market.
Properly, housing and financial circumstances as we speak is probably not precisely like 2008 – shorthand for the monetary catastrophe that popped that decade’s actual property bubble, creating the Nice Recession. But, that ugly housing period wasn’t the Golden State’s solely actual property debacle.
Many individuals can’t – or received’t – recall how dangerous California’s housing market was within the Nineties, an actual property droop that had lots in frequent with the present financial system.
Properly, this jaded, previous journalist remembers when the California increase of the late Nineteen Eighties ended with a thud — a painful begin to a recessionary decade. Name it one other reminder of California actual property’s dangers.
There was a lack of lending assist. Just like the Federal Reserve’s current finish to its mortgage-buying program, the late Nineteen Eighties demise of the nation’s financial savings and mortgage trade – key actual property lenders, particularly in California – made financing more durable to get because the Nineties unfolded.
Then, just like 2025’s commerce warfare, worldwide change introduced financial ache.
The tip of the Chilly Conflict with the Soviet Union translated domestically to dramatically much less protection spending within the Nineties. That slashed jobs within the beforehand flourishing manufacturing sector, particularly the aerospace corporations in California.
Let my trusty spreadsheet illustrate the influence of these financial losses on dwelling costs, as measured by information from the California Affiliation of Realtors and numerous authorities businesses.
In Might 1991, the statewide median gross sales value of a single-family dwelling hit a document $211,000. It could take nearly eight years for a brand new document to be set at $212,300 in March 1999.
That’s zero appreciation over nearly eight years. Zero.
The Nineties plummet was gradual ache. Its backside wasn’t hit till February 1997 at $167,800 – 20% off the 1991 peak.
Ugly follow-up
The Nineties could be remembered as a legendary crash if it weren’t for what occurred subsequent.
The California financial system, notably dot-com tech shares and the housing market, took off within the late Nineties.
Housing had a secret salve: all kinds of easy-to-get mortgages. Aggressive lending even allowed the housing market to brush off the 9/11 terror assaults and the dot-com inventory crash because the 2000s started.
By Might 2007 – somewhat over eight years because the Nineties debacle ended – the statewide median had set a brand new pinnacle at $594,500. That’s practically triple from the final crash’s finish.
Nonetheless, in mid-2007, simple mortgages disappeared, forsaking a wave of foreclosures. The world’s monetary markets wager closely on these dangerous dwelling loans. And when these mortgage bets imploded, so did the worldwide financial system in 2008.
California housing obtained clobbered. In lower than two years – in February 2009 – the market bottomed with a $245,200 median. That’s a 59% drop. Sure, 59%.
California dwelling costs didn’t attain a brand new peak till Might 2018 at $600,900. That’s 11 years with zero appreciation.
Since then, costs have elevated by 50% to $900,200 as of Might 2025.
Assist needed
Bear in mind what drives housing: Jobs. Jobs. Jobs.
California’s two eye-popping dwelling value crashes featured prolonged intervals with no new paycheck creation.
In December 1990, California employment peaked at 12.6 million employees. The following document was set in November 1995.
That’s 5 years with out including to the job tally – primarily a hiring freeze tied to sharp cuts in protection, development and finance. On the time, it was the longest hiring flatline since World Conflict II.
However then got here California’s booming tech companies, which had been solely quickly derailed by the dot-com mess. Actual property industries, fueled by easy-money loans, reversed gears. Different employers joined the hiring spree.
Statewide employment ebbed and flowed as much as 15.6 million by December 2007. Then housing collapsed. Different companies adopted, and the Nice Recession was underway.
This California employment peak wasn’t exceeded till October 2014. An financial storm that prolonged nicely past actual property made for an nearly seven-year job-creation drought, topping the Nineties dry spell.
Two housing-crash eras embody a dozen no-growth years for job seekers. Within the different 23 years since 1990, California averaged 250,000 new jobs yearly.
Or take into consideration statewide unemployment.
Joblessness averaged 7.8% within the Nineties crash. It was 8.3% in 2007-2018. And all different instances since 1990? Simply 5.8%.
Please notice that the lately wholesome job market is one largely ignored cause why as we speak’s California housing is just languishing, not collapsing. California joblessness averaged 5.3% in early 2025.
Actual numbers
How ugly do fundamental housing metrics look throughout California crashes?
Properly, begin with this. We mentioned two prolonged intervals of zero value appreciation. All different instances since 1990, the California median value surged at a median 10% annual price.
So housing’s both flopping or popping. And it’s up at only a 2% annual price in 2025’s first 5 months.
What will get house owners in a promoting temper? Crashes do the job, in accordance with a Realtors’ stock metric.
Throughout the Nineties stagnation, it will take a median of 9.7 months to promote all of the California properties available on the market. Throughout the 2007-2018 implosion, stock averaged 5.1 months.
All different instances since 1990? Listings equal simply 3.5 months of gross sales. And 2025’s begin? 3.8 months.
Sellers should be affected person in crashes, taking a look at Realtors’ common days on market stats.
Homeowners waited 63 days within the Nineties mess earlier than signing a gross sales contract. It was 40 days across the Nice Recession.
In different instances, although, it was solely 29 days – together with 25 to start out this yr.
Mortgage insanity
Cheaper financing amid these calamities helped gasoline the market’s eventual restoration.
Within the Nineties bust, the 30-year fastened mortgage, as tracked by Freddie Mac, went from 9.5% to as little as 6.7% – a 30% enhance in a borrower’s shopping for energy. Charges completed this ugly interval at 7%.
Throughout the 2007-2018 blowout, charges that began at 6.3% dropped to three.4% – a 40% enhance in a borrower’s shopping for energy. Charges rose again to 4.5%.
Think about how this compares with the pandemic.
In January 2020, simply earlier than the coronavirus upended the financial system, mortgages had been at 3.6%. Fears of one other housing collapse prompted the Fed to take extraordinary measures, slashing charges to 2.7% by yr’s finish. However that was solely a 13% enhance to purchasing energy.
To 2025 home hunters, that’s the great previous days.
Who should purchase?
In the present day’s crushing lack of homebuying affordability is driving California’s housing fears.
Mortgage charges run round 6.5% as costs stay close to all-time highs. Ponder “affordability” as measured by California’s Realtors, a mixture of costs, charges and incomes.
In 2025’s second quarter, the mathematics reveals simply 15% of households statewide might comfortably purchase the $905,700 median-priced, single-family home.
Distinction that to the beginning of the Nineties debacle. The Realtors’ affordability index was at 22%. And the Nice Recession’s slide started with 11% affordability.
Bear in mind, “affordable” means “cheaper” housing. And value crashes create alternative.
Within the Nineties tumble, California’s affordability peaked at 44%. The Nice Recession’s excessive was 56%.
That’s why some home hunters dream of one other 2008. Or the Nineties.
