Why We Are NOT Headed For Any Housing Crash!

Why We Are NOT Headed For Any Housing Crash!

As we have always argued... simple Economics 101. Without government interference, supply and demand will ALWAYS drive the economy naturally and effectively! We have a greater population of people in the homebuying age group than EVER in history (even greater than the baby boomers era!) while at the same time, the lowest (per capita) inventory that ever in history. The cause of low inventory is three-fold: 1) Governmental/Fed manipulated rates driven down artificially into the 2's and 3's have created an unanticipated change in the thinking of current homeowners. Where there would be the normal move up or downsize and even normal relocation by homeowners, the decision to "stay put" simply because of the low rates is a huge factor.2) Because of inflation (caused by that same Government/Fed giving away free money to everyone during Covid and an overwhelming spending spree by consumers for the last 2+ years that has been supported by over $1Trillion (!!) in credit debt... the majority of first-time homebuyers have been squeezed out of homeownership "affordability" with rates that reached into the 8's (although much lower today) 3. We have less new construction (per capita) than ever before in history. This on top of next-to-no new construction in the lower to median price ranges has caused an unprecedented shortfall of available new homes and put pricing pressure on resale homes where there are so few available. But all is not looking as bleak as it has been. Rates are declining slowly which is helping with affordability. Inflation is slowing, which helps rates. Inventory has begun to climb, albeit still slow. Experts believe all these positive factors will continue over the next few years, especially with an aging population and the movement this will also cause. The question for you, if you are thinking of buying or selling... will you sit on the sidelines and wait as prices continue to go up... or make that move now and before being caught up again in multiple-offers on every house; having to waive the normal (protection) contingencies in the home-buying process and homes being sold at over-list-price? It's already starting to happen in many markets. If you'd like to discuss a strategy or two, let's explore! Have a blessed day!

Why We Aren't Headed for a Housing Crash

If you’re holding out hope that the housing market is going to crash and bring home prices back down, here’s a look at what the data shows. And spoiler alert: that’s not in the cards. Instead, experts say home prices are going to keep going up.

Today’s market is very different than it was before the housing crash in 2008. Here’s why.

It’s Harder To Get a Loan Now – and That’s Actually a Good Thing

It was much easier to get a home loan during the lead-up to the 2008 housing crisis than it is today. Back then, banks had different?lending standards, making it easy for just about anyone to qualify for a home loan or refinance an existing one.

Things are different today. Homebuyers face increasingly higher standards from mortgage companies. The graph below uses?data?from the?Mortgage Bankers Association?(MBA) to show this difference. The lower the number, the harder it is to get a mortgage. The higher the number, the easier it is:


The peak in the graph shows that, back then, lending standards weren’t as strict as they are now. That means lending institutions took on much greater risk in both the person and the mortgage products offered around the crash. That led to mass defaults and a flood of foreclosures coming onto the market.

There Are Far Fewer Homes for Sale Today, so Prices Won’t Crash

Because there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), that caused home prices to fall dramatically. But today, there’s an inventory shortage – not a surplus.

The graph below uses data from the National Association of Realtors (NAR) and the Federal Reserve to show how the months’ supply of homes available now (shown in blue) compares to the crash (shown in red):


Today, unsold inventory sits at just a 3.0-months’ supply. That’s compared to the peak of 10.4 month’s supply back in 2008. That means there’s nowhere near enough inventory on the market for home prices to come crashing down like they did back then.

People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s

Back in the lead up to the housing crash, many homeowners were borrowing against the equity in their homes to finance new cars, boats, and vacations. So, when prices started to fall, as inventory rose too high, many of those homeowners found themselves underwater.

But today, homeowners are a lot more cautious. Even though prices have skyrocketed in the past few years, homeowners aren’t tapping into their equity the way they did back then.

Black Knight?reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has actually?reached an all-time high:


That means, as a whole, homeowners have more equity available than ever before. And that’s great. Homeowners are in a much stronger position today than in the early 2000s. That same report from Black Knight goes on to explain:

“Only 1.1% of mortgage holders (582K) ended the year underwater, down from 1.5% (807K) at this time last year.”

And since homeowners are on more solid footing today, they’ll have options to avoid foreclosure. That limits the number of distressed properties coming onto the market. And without a flood of inventory, prices won’t come tumbling down.?

Bottom Line

While you may be hoping for something that brings prices down, that’s not what the data tells us is going to happen. The most current research clearly shows that today’s market is nothing like it was last time.

要查看或添加评论,请登录

Ron Cahalan - MLO and R/E Rehab and Construction - I PAY CASH的更多文章

  • Rent vs Buy... in today's market?

    Rent vs Buy... in today's market?

    Are you torn between whether it makes more sense to rent or buy a home right now? Consider this. Renting may be the…

    1 条评论
  • What's the real value? Who can you trust?

    What's the real value? Who can you trust?

    Can you trust the online "Zillow and Redfin" platforms offering value estimates? Absolutely NOT! They are in business…

  • Happy Valentine's Day!!!

    Happy Valentine's Day!!!

    The best way to "compound" the love of one another and your returns on assets..

  • Win By Purchasing Your House! Don't Wait!

    Win By Purchasing Your House! Don't Wait!

    You may be sitting on the sidelines wondering if it’s better to buy now or wait. But buying before the spring rush may…

  • More Inventory! Finally!!!

    More Inventory! Finally!!!

    Buyer Bright Spot: There Are More Homes on the Market The past few years have been challenging for homeowners…

  • How Home Equity Can Help Fuel Your Retirement

    How Home Equity Can Help Fuel Your Retirement

    If retirement is on the horizon, now’s the time to start thinking about your next chapter. And you probably want to…

  • Price too high??

    Price too high??

    There’s one big mistake you need to avoid when you sell your house – and that’s setting your asking price too high…

    1 条评论
  • Multi-Gen, Multi-couple, Multi-friends Buying Helps With Community and Affordability!

    Multi-Gen, Multi-couple, Multi-friends Buying Helps With Community and Affordability!

    A record number of families are buying multi-generational homes, and lately, the big reason for this is affordability…

    1 条评论
  • Stage my home or not? Is it worth it?

    Stage my home or not? Is it worth it?

    Home Staging FAQ: What You Need To Know You may have heard that staging your home properly can make a big difference…

    1 条评论
  • Want to Win That House? We Will Help You Offer Cash & Then Get Your Mortgage Later!

    Want to Win That House? We Will Help You Offer Cash & Then Get Your Mortgage Later!

    Especially as the rates continue to come down slightly, the competition for homes is going to increase dramatically…

社区洞察

其他会员也浏览了