Yet the price of a typical single family home price fell by 17 percent between 1990 and 1996. A price decline of that magnitude and duration must have had its cause in something. And it did — but that primary cause was not external to the market itself, and it wasn’t anything that took place during the downturn.
The housing bust was the inevitable result of the housing boom that preceded it.
A speculative bubble took place in the late-1980s San Diego real estate market. For a brief peak at some evidence, consider the accompanying chart of San Diego home prices and rents in the half-decade leading up to 1990.