There were a number of differences in 1989. For one thing, those buyers were’t engaged in what I’d call speculation. There was no real flipping, at least not in the way we saw it this time around. People were mostly paying extra out of fear. I called it “fear-buying” at the time. These buyers were genuinely concerned that if they didn’t buy then they would never get in.
I haven’t seen much comment about this, but one of the factors driving the fear back then was that there was some political acticity on the so-called “slow-growth” initiatives. Rent controls in various cities and counties were being enacted and pressure was being applied to the cities to curtail growth by downzoning densities, increasing fees and the like. People were literally sold on the idea that we were out of buildable land.
We didn’t have people quitting their jobs to dabble in RE flipping, they werent’ exporting their equity to other states, and there was no “property ladder” train of thought. People simply wanted a place to live and were afraid their time was running out. Property investment was mostly about generating positive cash flow through rental income, not about holding for a year and expecting a 30% return from price appreciation.
