This is one of the top questions I have been receiving in the last few weeks regarding the real estate market. Consumers understandably are wondering how the home prices
are being affected, and if a housing crisis is on the horizon. The fear and pain from the housing crash in 2008 has left folks wondering if something similar is close by. According to Broker and real estate expert of over 30 years, Joe Younger says: “I believe that there are a number of fundamental differences between what we are dealing with today, and what we dealt with in the 2008 housing crisis. Today’s challenge, at least in housing, is a short-term market reaction to a global pandemic.” Here are three reasons why this market is different, and where experts predict the market will go.
One of the main differences between 2008 and now is the rate of appreciation houses experienced the years before the crash. Looking at the visual chart courtesy of Keeping Current Matters, between 2000-2005, the appreciation rates were considerably higher. In recent years, yes, prices have increased, however at a more steady and reasonable rate. Too much appreciation can cause high home prices making it to difficult to sell in the future.
Next, we take a look at the Mortgage Credit Availability Index (MCAI). As we know, one of the largest reasons for the 2008 crash was the excessive amount of loans lenders were giving out without proper qualifications. As you can see from the graph below, during the housing bubble in 2008, the MCAI indicated how easy it was for people to get a loan. Since the crash, restrictions have tightened. Currently, the index shows a low number, meaning lenders are giving people loans who can truly afford it.
Last, we will take a look at inventory.
Leading up to the crash and a few years afterward, it was a buyers market. There were a lot more homes for sale compared to those who were able to buy. Today, we see quite the opposite! There is an inventory shortage. More consumers are looking to buy compared to houses actually on the market. This means there is a high demand compared to the supply.
Overall, we see two very different markets from now and the housing crash in 2008. In fact, experts predict a boom in the market once restrictions are lifted. Mr. Younger states, “We are seeing a tremendous amount of pent up demand in the housing market. With that market tension, we continue to be very optimistic about a steep V-shaped recovery. In my opinion, and the opinion of most economists, housing will be a massive driving force in that recovery process.” Considering the low-interest rates, inventory shortage, reasonable housing costs, and a tremendous amount of buyers looking, it seems like the perfect storm that is keeping the real estate market strong.
“We are seeing a tremendous amount of pent up demand in the housing market. With that market tension, we continue to be very optimistic about a steep V-shaped recovery. In my opinion, and the opinion of most economists, housing will be a massive driving force in that recovery process.” -Joe Younger
If you are considering buying or selling during this time, we can certainly help you. We are working tirelessly and safely to get consumers ready for when restrictions are lifted. Don’t wait! For more updates on the market, or to see what your home is worth contact us today.