A QUICK HISTORY

OF REAL ESTATE

INVESTING
November 26, 2019
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House flipping has seen a surge in popularity in the past decade or so, but the practice of buying
and reselling houses as an investment has been around for quite some time.
Did you know that investing in real estate goes back to before the Revolutionary War?
Let’s explore the history of real estate investment, and see how this long-standing industry has
come to be what it is today.

FROM CAVE DRAWINGS TO

CONDOS
Real estate investing has become quite popular in recent years due to rising property values and
low-interest rates, but where did it start?
The earliest recorded history of the real estate industry has been found in cave drawings. The
incorrect “history” of landlords would have you think that caves were “rented out” to tribal
Homo Erectus.
While this might not be true, historians do verify that there could have been a sort of currency
exchange among ancient peoples for shelter.
The development of property rights for land created the first “defensible property” and marked
an important moment in real estate.
The industry may have been conceived by our ancient ancestors, but regarding selling a property
for financial gain, the ambition of man was the driving force for this evolution.
The development and marketing of real estate had become a popular method of income and was
fairly common throughout the Middle Ages.
Property ownership was a symbol of wealth and was one of the primary ways for the wealthy to
ensure their assets. As an established industry, the real estate market flourished, and came with
European colonists to the United States.
Mixed with the opportunities of a New World, and the foundation of a free-market system, the
seeds were planted for American entrepreneurs to turn the industry into a money-making
machine.

THROUGHOUT HISTORY,
AMERICANS HAVE CASHED IN
ON FINANCIAL FREEDOM
As a whole, real estate is sensitive to the ups and downs of the economy. Throughout the 19th
and early 20th century, the combination of a capitalist economy and a growing population made
the expansion of land-use a hot market.
The economic prosperity of the 1920s brought about a huge surge in real estate, especially in
housing, but by the mid-1930s, 16 million people were unemployed and the demand for real
estate of all types declined. Soon after, World War II brought technological innovation and a
backlog of demand for new construction.
The mortgage stability introduced by federal legislation following the Great Depression and
World War II greatly aided the huge expansion of suburban housing that followed the war.
A precursor to the house flipping phenomenon was the enactment of the Federal Real Estate
Investment Trust (REIT) legislation. On Sept. 14, 1960, President Dwight D. Eisenhower signed
legislation that combined the best attributes of real estate and stock-based investment to create a
new way of producing income.
This act made it easier for large investors to pool resources for real estate projects. The
legislation has been modified over the years and has led to a much larger real estate industry, and
as you may know, expanding industries are always looking for new markets.
As a result, today, there is a much greater opportunity for those looking to pursue property
investment.
In the 1980s, television programs such as the PBS feature “This Old House” gave rise to dozens
of home improvement programs on cable television. Since then, the entertainment industry has
taken the lure of reality TV, combined it with the popularity of REI, and ran with it.
The spike in shows based on home repair, house flipping, and DIY projects, has encouraged
thousands of real estate investments in recent years, while such high ratings continue to provide a
powerful venue for real estate pros.
At the same time, the economic recession of the 1980s had the double effect of holding down
stock market earnings and increasing the number of house foreclosures. With an ample supply of
foreclosed homes for potential renovation, golden opportunities for property investment made an
appearance.
Soon, dreams of investment success and financial freedom became real, and profitable property
investment was found to be an attainable goal for average Americans.
WHEN DID HOUSING BECOME
AN INVESTMENT?
The economic recession of the 1980s kindled the fire for real estate investment with more
foreclosed properties on the market. But, it wasn’t until around the year 2000 that flipping
houses really took off.
That’s also when the massive pricing bubble occurred. This was followed by the mammoth
housing crash and economic downturn.
By that time, the Fed had been lowering rates with each downturn of the economic cycle.
Meanwhile, countries like China were buying up U.S. debt in an effort to manage their own
currencies against the dollar.
There was a great deal of liquidity in the economies of the developed world, including the U.S.
Some have even pointed to the bursting of the tech bubble as giving rise to the real estate
investment trend, as that money was pulled out of Internet startups and found a new home in real
estate investments.
With the continued decline in mortgage rates, real estate investing started to look attractive to
those looking to put their dollars into something new.
While real estate investing may have started as a fad, the housing crash brought with it a fresh
supply of distressed properties and a new pool of potential renters as displaced homeowners were
forced to lease.
With mortgage rates low, real estate investing began to take off and soon became an attainable
goal for homeowners who were financially stable enough or had enough equity in their primary
residence to secure financing.
No longer just a sideline for real estate agents or a new portfolio for the wealthy, real estate
investing began to hit mainstream homeowners who were suddenly flipping houses or adding the
job of the landlord to their resume.

IMPORTANT DATES IN REAL

ESTATE HISTORY
The real estate industry traces its roots all the way back to the early 1800s when the Louisiana
purchase became the first major real estate acquisition made by the U.S.
By 1855, the first real estate brokerage was established and by 1908, the National Association of
Real Estate Agents, the predecessor to today’s National Association of Realtors, was founded.
The association became the originator of the term “realtor” to distinguish members from non-
member agents.
The Great Depression led to the New Deal in 1938 and the development of the Federal National
Mortgage Association, which became known as Fannie Mae.
By the 1960s, local multiple listing services began sprouting up state by state. In 1970, the
Federal Home Loan Mortgage Composition, or Freddie Mac, was established.
The 1980s saw historically high mortgage rates, while the 1990s heralded a new era in real estate
as listings started becoming available online.
By the start of the new millennium, prospective buyers were finding it even easier to search
listings with the establishment of broker reciprocity, known as the IDX.
But all the tech advances affecting real estate would soon be overshadowed by the mortgage
crisis of 2007. Real estate values plummeted, causing an economic crisis as many homeowners
found themselves owing more on their mortgage loan than their home was worth.
It wasn’t until 2012, the economy showed signs of a full recovery while interest rates remained
at historic lows.