gdox believes that the late 70’s had unusually high mortgage rates, and that this had the effect of reducing home prices ( and therefore, the income multiplier). At that time I lived in SD and sold some properties. It is true that properties took a while to move, but not true that housing prices declined to any significant extent. The reason: creative financing. If an owner actually wished to sell, they became the lender (at reasonable interest rates typically around 7-8 percent). There were many such alternatives promoted by the real estate industry to keep the cash flow going. “Creative Fincancing” was truly a huge buzzword at the time.
Banks and other traditional lenders were used only as a last resort, though it surely did happen.
Also, one merely needs to look at historical price data (OFHEO) to understand that there was not a significant price decline at the time.
My, albeit biased, conclusion is that the thrust of the article remains intact.
