Housing and Employment Connections in the 1990s

• During the 1990s, while the California housing bubble was taking off, employment was driven by technology. Oddly enough, the price correction that should have occurred when the tech bubble burst did not happen. The housing bubble continued to grow. Foreclosure Blues provides a graph plotting nonfarm income against housing prices from 1975 through 2010. It is apparent that during the 1990s, the real estate bubble led employment numbers and not the reverse.
  
  

The Sunshine Mentality

• Part of the reason for California's housing bubble of the 1990s is the sunshine mentality, states My Budget 360. Arizona, California, Florida and Nevada all had housing bubbles, and all of them happen to be in climates that tout year-round sunshine. The desirable climate led to housing booms in these places. In essence, the implication of the sunshine mentality theory is that real estate development in California, as well as in several other states that have sunny winter climates, spurred the housing bubbles of the 1990s.
  
  

Two-Income Families vs. Easy Credit

• Like much of the rest of the nation in the 1990s, Californians had transitioned from one- to two-income families. The increased income per household may have led to home values rising during the 1990s. The higher family income may have created more demand for housing. "It is more likely that home values grew in the [1990s] more on the introduction of exotic mortgage products that didn't rely on income measures." states Doctor Housing Bubble. The housing bubble, which started in 1975 and really took off during the 1990s, has a correlation to the easy credit environment of those days. Both factors probably contributed to the bubble.
  
  

Saving & Loan Crisis

• The savings and loan crisis, which affected California as much as any other state, reared its ugly head in the late 1980s. By 1989, Congress passed the Financial Institutions Reform, Recovery and Enforcement Act of 1989. It restructured the regulation of the entire U.S. financial industry, according to eRisk.com. Just as the last of the toxic mortgages that resulted from the easy credit environment of the early 1980s were finally being absorbed by U.S. taxpayers and order was being restored in the financial sector, the run up of housing prices began, leading to what is known today as the California housing bubble.