With bidding wars and lack of inventory, many people are asking us if we feel like the market may crash. You know the saying, “What goes up, must come down.”
I understand how scary it may be thinking about what to do.
After selling a lot of homes ourselves, this is a very unpredictable time. But let’s truly compare what happened back in 2008, when we had one of the biggest crashes in American history.
According to the National Association of Realtors chief economist, Lawrence Yun, he says, and I quote, “Such a frenzy of activity reminiscent of 2008, raises questions about a bubble and the potential for a painful crash. The answer? There is no comparison.”
Back in 2008, dubious adjustable rate mortgages taxed many buyers’ budgets. Some loans didn’t even require income documentation. Today, buyers are taking out 30-year fixed rate mortgages.
14 years ago, there were 3.8 million homes listed for sale and home builders were putting about 2 million new units. Now, inventory is only about 1.5 million homes and home builders are underproducing relative to historical averages.
So, the thing to notice from that quote was when he said, “There is no comparison”.
Also, major contributors to the crash back in 2008 was the fact that stated income loans were being given to buyers. Buyers were being qualified for a loan they simply could not afford and in many cases, little paperwork was needed to qualify for a loan. Some would simply say, “State what they made, and that was considered enough.”
That is not the case now. Lenders pretty much want your firstborn child in order to approve you. They go above and beyond in qualifying buyers for a loan and making sure that they have the means to pay.
That should give us some relief in respect to the housing market and its sustainability. Also, homes appraising at exceedingly higher values from one week to one month, to the next month, had a significant impact on the crash. That is just not happening anymore. There are stringent guidelines for appraisals and the amount a bank will lend for a home.
I feel we should all take solace knowing that there are many more factors that led to the crash of 2008 that we just do not see today.
Reach out any time, even if you just have questions. And remember, we are always here to help!