As a follow up to yesterday’s look at Time magazine’s Housing covers, Paul Macrae Montgomery of Universal Economics was kind enough to share this report from 1992.

In that research piece, Paul had made mention of an October 1st, 1990 cover story in Newsweek: The Real Estate BUST.

>

>

How well did that cover work out ?

>

Pretty well indeed . . .

Category: Contrary Indicators, Real Estate, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “1990 Newsweek Cover: The Real Estate BUST”

  1. Petey Wheatstraw says:

    Buy now, or be priced out FOREVER!

    There has never been a better time to buy a home!

    Time/Newsweek: Leading economic indicators.

    Lawrence Yun was right all along!

    Oy!

    The only way we see the housing market turn around is if the banks decide to liquidate their underwater RRE “assets” at mark-to-reality prices, or Bernanke decides to drop $500K, or so, to every citizen in the country. Not that that won’t happen, but it ain’t real likely.

    This time IS different.

  2. mathman says:

    Some inspiration for when the next leg down becomes permanent reality:

    http://www.vbs.tv/watch/motherboard/the-technological-disobedience-of-ernesto-oroza

  3. Michael M says:

    The problem with using covers as indicators is that they sometimes reflect consensus (“The Death of Equities”), sometimes are provocatively anti-consensus (“America’s Back”), sometimes just provocative (“Cheap Oil Forever”) and sometimes are calls on the economy or something else (“China’s Century”) rather than the stock market or a specific asset.

    Furthermore, there is a tendency to look for covers that worked as contrarian indicators (confirmation bias), not covers that were more or less spot on (e.g. Business Week Feb 11, 2008 cover “Meltdown for Housing, the worst is yet to come” – at that time the CS index had only completed half its descent from peak to (first?) trough).

    The April 20,2009 Newsweek cover “Cheap Oil Forever”, was a great contrarian indicator in retrospect, but did it really reflect a consensus view or something that resonated with readers? Had the peak oil crowd really thrown in the towel at that point?

    On the other hand the May 9, 2005 Newsweek cover “China’s Century” was one of the greatest market calls ever IF it was a market call. The Shanghai Composite (C-300) bottomed at 998 on June 6, 2005 and then exloded up to 6124 on Oct 16, 2007. But was it really a bold market call or was it just reflecting the consensus view on China in general, which given that it was a call on an entire century could still be very wrong and close to the peak of Chinaphoria when looking at a chart of the years 2000-2100.

    Covers are tricky, but interesting food for thought.

  4. BennyProfane says:

    I remember the housing “crash” in NYC and Boston at the time, affecting mostly smaller apartments and outer borough and suburbs. I worked with more than one person who spent the late eighties telling me I was a fool not to “own”, and those same people were underwater (yes, this happened once in our recent history) for almost the entire 90s, and just relieved to sell the albatross at any price at the end. I did eventually buy an apartment in Bronxville, lower Westchester county, for 65,000, and the “owner” took my first lowball offer with a big smile, even though he bought the place for 120,000. The ex has the place now, and it’s probably HELOC’d to death, if I know her, but, this taught me all during the last decade that, yes, real estate does go down in value. Still watching this big one work out. I can be patient. I’ll whip out the checkbook in 2015 or so.

    Speaking of the Time/Newsweek cover jinx, I guess this didn’t work for Springsteen, since he was on both at the same time, right?

  5. TizzyD says:

    The Newsweek cover might have worked well as a contrary indicator for the homebuilding stocks, but as for the “underlying” it was actually pretty prescient. At least in SoCal. I should know. Low-balled a place in July 1991. Back to breakeven around 1996 or so, based on comps……..

  6. MikeG says:

    Newsweak was a little early as an indicator for Southern Cal. The late-80s boom topped out in 1989, then prices started dropping sharply into 1993 or so; it didn’t regain the 1989 price level until 1996.

  7. Jojo says:

    Living in NJ back then, I brought a new 2BD condo in a new building Cliffside Park for 190k in July 1988. I sold it in Dec 1991 for $140k after having been laid off back in mid Sept and on my way to Calif. At least I didn’t sell it at the chart bottom. :)

    The economy was horrible at that point, as I recall.

  8. “Universal Economics” is, almost, as good as “Universal Import & Export Ltd.”
    ~~

    the, literal, ‘Upside-down’ House, on the Cover, is well-done–have ‘Cover Editors’, too, dumbed-down their approach over the last ~two Decades..?
    ~~

    this: “Buy now, or be priced out FOREVER!”, as ‘Petey’, so kindly, reminds us of, was Truly amazing..

    One for the ‘Record Books’–if, only, the CogPsych ones..

    that, otherwise, seemingly sentient Individuals, actually, believed it, may be useful, as a Proof, for these type of Exploits..
    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=The+Mighty+Wurlitzer+Operation+Mockingbird