Why We Are NOT Headed For Any Housing Crash!
Ron Cahalan - MLO and R/E Rehab and Construction - I PAY CASH
(480)-204-1812 - Certified Mortgage Advisor and Fix and Flip Re-Construction Investments. WILL ALSO PAY CASH FOR PROPERTIES WHEN YOU NEED TO SELL FAST! LET'S CHAT!
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):
领英推荐
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.