California's housing market faces fragility, resembling past downturns, particularly the 1990s slump that followed the late 1980s boom. The late 80s downturn was driven by a loss of lending support, including the savings and loan industry's collapse. Economic shifts like the end of the Cold War led to decreased defense spending and job losses in the aerospace sector. Home prices stagnated, with the median price dropping significantly over the years, reaching a low in February 1997. This historical context serves as a reminder of the inherent risks in real estate.
The end of the Cold War with the Soviet Union translated domestically to dramatically less defense spending in the 1990s, slashing jobs in California's aerospace sector.
In May 1991, the statewide median sales price of a single-family home hit a record $211,000, taking almost eight years to reach a new record of $212,300 in March 1999.
The loss of lending support mirrored issues seen today; the demise of the savings and loan industry in the late 1980s made financing harder as the 1990s unfolded.
The 1990s housing market slump in California was characterized by a lack of appreciation, with prices at a ten-year standstill, only hitting their peak again in 1999.
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