So, is the real estate housing market about to crash?
This rapid rise in home values looks like a bubble, but it doesn’t look like any we have faced before.
I give three reasons I don’t think the real estate market will crash in the near future.
Three reasons. The housing bubble is not about to pop. And with home prices continuing to deliver double digit increases, some are concerned that we’re in a housing bubble like the one in 2006 to 2008. However, a closer look at the market data indicates this is nothing like the last bubble.
And here are three reasons why. Hello, everyone. I’m Steve Huhta from Century 21 Union. And houses in South Bay. And the number one reason this is not like before is that the housing market is not being driven by risky mortgage loans.
Now, back in 2006, almost anyone with a pulse could qualify for a loan without showing much documentation as to whether they could afford to even pay it back. Now, the mortgage credit index is an indicator of the availability of mortgage money.
The higher the index, the easier it is to obtain a mortgage. In 2006, the index was 869. Today, the index stands at one hundred and thirty. An example is just the volume of mortgages for people with less than a 620 fico score.
As you can see, even with larger dollar loans today, the industry is taking less chances with risky mortgages. Now, the number two reason this doesn’t look like the bubble before is that homeowners are not using their homes like ATM machines this time.
In the last bubble, people were constantly refinancing and pulling all the equity out of their homes. So when prices fell, people just walked away from their homes. When the value is less than what they owed, not today, homeowners are letting that equity build up.
So even if prices fall, homeowners will still have lots of equity and value in their homes. And the third reason this is not the same as last time, prices are being driven simply by supply and demand. We simply just don’t have enough homes to satisfy the demand in the marketplace and there’s no quick fix for new housing
completions, as you can see, is much lower than normal. And with the pandemic, fewer people are putting their homes up for sale, also reducing supply, whereas demand has actually increased during the pandemic. When people have realized that their current homes do not fit, their new stay at home needs.
So bottom line, this is nothing like 2006. There’s no indications that demand will slow down significantly in the near future. You have to remember that millennials just entering the market still need houses and prices will continue to rise because of that demand.
So if you or someone, you know, is thinking of buying or selling a home, contact us so we can help put a plan together for you. Bye for now.