Written by Rich Reed

Excerpts From October, 1990 Newsweek Edition: “We’re going to pay the price for having the greatest real-estate boom in the history of the world -” Anthony Downs, The Brookings Institution

Despite the warning signs, regulators took little action.“It’s very hard to be a naysayer when everybody’s doing it and making a buck,” says Robert Miailovich of the Federal Deposit Insurance Corporation.

The developers’ troubles are translating into serious losses for the country’s financial system, particularly banks.The portion of bank real-estate loans that are in default has jumped by 30 percent in the past year.

Experts warn of bank failures that could wipe out the in-surance fund that covers depositors’ money—and require yet another taxpayer bailout.

“I think we’re going into the worst real-estate market since the Great Depression,”says David Shulman of Salomon Brothers. “It will be harder to recover from this cycle.”

“Not since its birth during the Great Depression has the federal system of deposit insurance for commercial banks faced such a period of danger as it does today,” the GAO’s Bowsher said recently. Regulatory and bank efforts to staunch further losses may have unfortunate side effects: banks are cutting back on even non-real-estate loans.

hese are certainly interesting times. As a person who provides for my family through the real estate industry, I’ve contemplated jumping out my office window the past few weeks (fortunately it’s a single story building). In all seriousness, this article reaffirms what many of us who are students of the industry already know—that this too shall pass. Still, after reading the 1990 issue of Newsweek, I was amazed that the vast majority of the article could easily be found on newsstands today! The excerpts above echo the same depressing news dominating the headlines this time around. But as Paul Harvey used to say, “Now you know . . . the rest of the story” regarding the “Real Estate Bust” re-ported nearly two decades ago. Given how area real estate values have escalated since then (even with the current market correction), wouldn’t it have been nice to have purchased property when this article was published?

I had a good friend who I respect very much point out to me that this time is different in that the crisis is accompanied by the collapse of several banking institutions along with a host of additional complicating factors. To which I had to respond, “True.” However, one constant among today’s crisis and the oil embargo of the 1970s, the changing of the tax code in the 1980s, the failed Savings and Loan crisis of the 1980s along with its subsequent bailout, and even “Tech-Wreck” that saw the implosion of Enron and WorldCom not that long ago . . . no one had ever seen it that bad since the Great Depression in each one of these events. Yet the resilience of our country and its people persevered, we all survived (albeit with scars at times), and the markets recovered. One quote from the 1990 article I found particularly interesting for my industry was, “In fact, for an event so cursed, the real-estate slump has actually cheered many people. One person’s Real-Estate Crash is another person’s Cheap House Bonanza.”

We will survive this too. But remember that the most important things in life have nothing to do with real-estate. Whether you are someone in a position to take advantage of the incredible buying opportunities out there today . . . or you are someone simply trying to survive this market . . . know that your wealth is not measured by your real estate holdings, but rather by your friends, loved ones, and how you live your life. So keep things in perspective, and as always, do not forget that life is happening regardless of what the market is doing - enjoy it!

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