How Bad Was the 1980s Real Estate Crash?

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In a previous post, I wrote about how the housing market crashed in the early 1980s under the crushing weight of the 17-18% mortgage rates, and how we seem to have forgotten how bad the real estate market suffered during that period. We hear a lot though about the "worst economy since the Great Depression©," but nothing about the "worst real estate market since the 1980s."

The graph above tells the story of how bad it really was back then. From the peak of 4 million existing-home sales in 1978, there was a 50% drop in home sales over the next four years, so that by 1982 only 2 million homes were sold (data here, Table 7). It took almost two decades, or until 1996, before home sales exceeded the 1978 level of 4 million units.

So before we compare today's economic conditions to the Great Depression, we might want to stop off in the 1980s before we go all the way back to the 1930s.