The 1970s: Adolescence and Turbulence
The 1970s were tumultuous times for the economy, for the stock market, and for REITs. Inflation, driven by the OPEC-led explosion in oil prices, raged out of control. The Consumer Price Index (CPI) increased by 6.3 percent in 1973, 11 percent in 1974, 9.1 percent in 1975, and 11.3 percent in 1979.
As if those headwinds weren't enough, the REIT industry was busy creating problems of its own. Between 1968 and 1970, the industry spawned 58 new mortgage REITs. Most of these used a modest amount of shareholders' equity and huge amounts of borrowed funds to provide short-term loans to the merchant development industry, which, in turn, built hundreds of office buildings throughout the United States.
Stalwart banks ...
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