The Last Real Estate Crunch

The current terrible real estate market has happened to us before, so maybe we can learn from history.  In about 1989 when prices started down, it was largely because banking regulations were changed.  New regulations pretty much forced Banks to "call" the loans of builders and developers who could not pay off their loans.  Banks took over housing developments (single family, townhouses, etc.) which were the collateral for the loans and put them back on the market at much cheaper prices than the builder/developers would have had to get in order to make a profit.  The banks just had to get enough to pay off their loans.  The builder/developers had already spent some of their own money to put in roads and sewers and build the project to whatever stage it was in.  That happened in large enough numbers that people suddenly couldn't get as much money for their properties any more. Over time, those properties were sold to "end users" -- people who made their homes in them.  After a while, the market wasn't glutted with cheap houses, and the prices started back up again.