Real estate lessons we should have learned from Japan — but didn’t
Posted by: in Stocks Money NewsFiled under: Consumer experience, Market matters, Money and Finance Today, Personal finance, Housing, Federal Reserve
Since writing today’s story about how real estate investors are driving up foreclosures, I’ve been thinking about what could have been done to avoid this mess. I started researching what happened in Japan, where the real estate bubble burst in 1991 and is only now starting to show some significant signs of recovery. I happened upon this excellent 1995 New York Times story about lessons to be learned from Japan. Here are some of the key points in that story still relevant to what’s happening in the U.S. today:
* Property values were cut in half and people are still stuck in homes they bought at prices too high. Even 14 years later many of these people can’t sell their homes because they owe more than they can get from a sale.
* Speculators used paper profits (from real estate or the stock market) to buy homes and stock using risky financial vehicles, increasing prices in both the stock market and real estate market. In the U.S. we had two separate bubbles — the stock market bubble that crashed in the early 2000s and the real estate bubble that just burst.
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