Are We headed for another Housing Market Crash?!
5 things that are Different TODAY Than They were in 2007/2008
Some people think we are in a bubble. Some people think it’s already popped. Some people think we are heading into in eminent housing market doom.
I have five reasons why I do not think the current situation is comparable to the housing crisis in 2007/2008.
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Home Prices Are Not Fluctuating As Much
Back in 07 and 08, the rate of appreciation was around 6%, which is not a bad number, but if we look back at years like 2004 and 2005, leading UP to the crash, we were looking at appreciation ABOVE 10% which was more than double what our inflation rate was at at the time, down in the 3-4% range.
2. Mortgage Lending Standards Have Significantly Tightened
Leading up to the crisis in 2008, there were a ton of lenders selling “The American Dream” of home ownership at a low price But, with EXTREMELY high risk. The main problem was that people with little to no credit were qualifying for subprime loans – which are loans that are usually extremely difficult to take out.c
Now lenders, especially my preferred ones, are working more responsibly, to ensure that loans are attainable and affordable, BUT they really check the boxes to make sure that what they are lending is helping boost the economy as opposed to being a detriment.
If you are in LA and do not have a trustworthy lender, PLEASE reach out. I have some incredible people that I can connect you with.
3. We don’t have a surplus of homes, we have a shortage.
We are in a Seller’s Market right now, NOT a buyer’s market. Pretty much starting at 2005, we were in a BUYER’s market.
And of course, when the crash happened, we really got into a pickle because we ALREADY had too much inventory on the market.
What I have been hearing that is making people nervous is that when all the COVID relief and forbearance is owed back in full, home owners won’t be able to pay it and they will lose their homes.
Yes, unfortunately, I’m sure that this WILL happen to many people here in the United States. BUT that being said, as far as our crystal ball is showing, our projection is that there will still be enough BUYERS out there to keep the market a float. That means we can get people the best price that they deserve for them homes.
And HOPEFULLY not as many people will be forced into foreclosures like in 2008, which was devastating.
4. Consumers are Treating Their Home Equity With More Care.
Well consumers were doing the same sort of irresponsible activities with their home equities and refinancing. As Americans, we were pretty much balling on a budget – and that budget was our homes. Super dangerous.
But in 2020, homeowners are treating the equity more carefully.
5. Home Owners Have More Equity in Their Homes
Nearly 40% of the population of homeowners own their home free and clear with ABSOLUTELY NO MORTGAGE. Meaning that if they were to sell TODAY it is mostly money in their pocket.
And of that remainder– which is a little over 60% - over a quarter of them have at least 50% equity in their home, putting us – people living here in America - in a much more stable position.
These five stats lead me to believe that we are not headed to a crash that is similar to 2008! What does this data make you think?
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