That drove down property values everywhere.Suddenly, your property that was worth $10,000 last year might now only be worth $5,000. If your bank went under, you were screwed out of your entire savings.And if you lost your job, that meant you also lost any means of continuing to pay back that home loan.Additionally, there were suddenly vast quantities of new construction for sale… that nobody could afford any longer. Many just failed, and those who had their deposits at banks that became insolvent just lost everything. With the deposit money of their customers.And then the Stock Market Crash of 1929 hit.Banks that were significantly overleveraged and undercapitalized were hit hard. People bought property and built homes on future credit that wasn’t based on anything but hope.And as the stock market ticked ever higher and higher, banks bet on it. There were significant speculation bubbles. Land speculators often bought what was left of the government land grants as the frontier closed.But, in the 1920’s, that began to change as banks felt more confident in lending credit for new construction. Many lived in tenements and apartments in cities, or lived as tenants on farms in rural areas. They ain’t makin’ any more of the stuff.” Real property was something that pretty much always appreciated in value.Prior to the early 1900’s, most people didn’t own their own homes. This is an excellent question that people really need to know more about.When we solve a problem, after a while, we tend to forget what solved the problem and go back to what we used to do that caused the thing to go over the cliff in the first place.That was the 2008 mortgage and financial crisis, as it forgot the lessons of the Great Depression.History up to the Great DepressionIn the 1920’s, when the economy was booming and it seemed like the party would never stop, banks lent out a ton of money on credit, with the presumption that all that money would be paid back and that there was sufficient collateral to cover it.Except, there wasn’t.One of the biggest assets that people might own that a bank could recover is real property.
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