Theory of Negative Milestones
I was writing another post about the housing situation in New Orleans and I kept coming across the phrase “post-Katrina” as in “post-Katrina policy landscape” [NYT] and it struck me how much negative economic or natural disasters help define a new period for the real estate market.
It gives people the ability to sweep away everything that occurred prior to the event and see things in the current market with a little more clarity. At that moment, history plays a lesser roll in defining how the current market is behaving.
It can also be a stressful period because, like most markets, buyers don’t like the unknown. When economic parameters change or are likely to change because of an event, it takes a while for participants to get used to the new rules. Its a delicate moment in time when buyer/seller psychology is at its weakest or most raw and the potential for misinformation is most high.
I find this whole concept this akin not to asking when it comes to real estate, “what were you doing when Neil Armstrong stepped on the moon?” but rather “where were you when the plane hit the north tower on 9/11?”
The irony is that the whole idea of real estate exudes optimism, hope, success, growth, shelter, safety and opportunity, but the events that define it are most often negative.
Here’s a list that helps define my interpretation of the real estate market after 20 years in the business. Some are more specific to New York City because that is where I work and there are certainly other milestones to consider. It also seems to me that the milestones are getting closer together, but that might just be only because they are fresher in my thinking.
- October 19, 1987 stock market crash
- 1990-1991 recession
- August 1998 stock market correction
- February – March 2000 NASDAQ correction
- June 2001 entering the recession
- March 2003 – start of the Iraq War
- June 2004 – Fed starts raising federal funds rate
- August – September 2005 – Hurricane Katrina and Rita