“Similarly, you could argue that a good historical analog is the savings & loan crisis in the late 80s, early 90s,” Snyder said. “There’s just not a lot of commercial real estate data from then. We really started as an industry collecting commercial real estate data more comprehensively around 2000. Some of the best historical analogs we can go back to are limited with the data, so it’s challenging to make sense of some of these transitions right now as an economist.”
Higher inflation and interest rates – both troublesome metrics being felt in today’s down market – paved the way for the S&L crisis, as recounted by Federal Reserve History. The result was twofold: interest rates S&Ls could pay on deposits set by the federal government were substantially below what could be earned elsewhere, according to the site, which prompted savers to withdraw their funds en masse. Since S&Ls primarily made long-term fixed-rate mortgages, the site reports, when interest rates rose those mortgages lost a considerable amount of value. This essentially wiped out the net worth of the S&L industry.
But again, there’s no comprehensive data from which to draw parallelisms to the current state of affairs. So as rich a vein as that crisis would have been to inform the present, there is no data from which to assess what’s happening today.
Maybe we should all pretend it’s all been a fever dream and it never happened. But economists are very different from you and me, and First American’s Snyder – true to his economist’s bona fides – couldn’t help himself: “It’s a fascinating time,” he allows.
That’s certainly one way to put it.
