In housing bust, patience is tough -- but necessary

CHICAGO -- It’s probably fair to say that a lot of home-sellers can’t remember much about the housing market before this decade’s big boom. But there have been arid spots in the real estate topography.

PMI Group Inc., a mortgage-insurance firm in Walnut Creek, recently revisited the data on three cities that represented the worst of such boom-to-bust cycles in the last 25 years.

Its new report took a microeconomic look at Los Angeles and Boston in the 1990s and Houston in the 1980s. In each, many homeowners trying to make a buck -- not a killing, mind you, just a profit -- had to settle in for a long wait. In the case of Los Angeles and Boston, the wait was as long as a decade. For Houston, nearly 15 years.

Los Angeles, for example, was seeing double-digit price run-ups in its housing for years until it peaked in 1990. At that point, a recession in the defense and technology industries soured the job market. And if you bought at that peak in 1990, when prices began to drop, you were unlikely to recoup your investment until late in 2000, according to PMI’s review of federal housing data.

The story in Boston was similar: In late 1989, technology jobs dried up and the market peaked. If you bought at that moment -- isn’t timing everything? -- you were unlikely to break even until early 1998, PMI said.

Houston’s “oil patch” bust, beginning in 1983, is probably the most storied saga in the market. If you bought then, at the worst possible moment, you were likely to have to wait 14.5 years to recoup, according to the report.

Are we there yet?

Probably not, said PMI economist LaVaughn Henry. “We don’t predict how far things can go,” he said. “But those three busts are extremes, a major economic shock to a major metropolitan market. If you look at the majority of markets, the time to recovery is much shorter.”

Patience is still needed, though, he said. “The housing boom wasn’t an overnight phenomenon. We can trace it back to early 2000, when the Federal Reserve started cutting interest rates. . . . At the end of the day, it took five years to get here,” he said. “It probably won’t take that long to get out,” largely because employment hasn’t plummeted.