MAY 2007 – Americans were rocked by a bank panic in 1907 but real estate held firm. New York REALTOR© Joseph P. Day would recall, “In the bank panic of 1907 the only thing that did not depreciate in value was real estate. When one big financier’s assets were sold in the middle of the panic, real estate was sold at a profit. The stocks and bonds sold were at a loss of from ten percent to fifty percent.”
Another New Yorker, William Harmon, said “When the mortgage lending companies could not depend on banks, three or four New York land title companies had to suspend. The question then was could mortgages be sold? For five or six weeks that was a very serious question. But finally the underlying confidence in real estate was so great- real estate was standing up so well- that people began to draw their funds out of savings banks and to buy mortgages.”
Memphis broker George W. Person (left) had been in the real estate business for thirty days when the panic hit. He was offered $150 a month plus horse and buggy to quickly liquidate $50,000 worth of real estate for a company in financial trouble. But nobody could withdraw more than $20 from a bank, so how to buy or sell property? Person’s answer was trade, using exclusive contract. According to NAR historian Pearl Janet Davies, “He did a rushing business. His first sale was for $25,000. When, sixty days later, the same parcel sold for $35,000, Memphis knew the panic was passing.” Person would later be a five-term President of the Real Estate Board of Memphis.
The events of 1907 was touched off by the failure of several New York trust companies. A positive result was the Federal Reserve Act, enacted six years later. Davies noted that the panic “was only an incident in the up movement of real estate. Accumulations of capital (notably those in title companies) were turning to mortgage investment and mortgage bonds, partly as a result of the panic, under which real estate had shown considerable strength.”