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Many people have been speculating that because of our market’s 21% growth in home prices in the last year, we’re repeating a similar cycle that we went through over a decade ago during the last housing crash. People who have bought into conspiracy theories fear that prices are going to plummet, there will be a wave of foreclosures, and the economy will crash. Today, however, we’re here to talk to you about the facts.
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We can tell you unequivocally that our market isn’t about to crash anytime soon. Nothing that is happening in our current market mirrors what was going on back then.
One factor that contributed to the crash of 2007 to 2008 was that almost anyone who applied could get a loan, and not just one loan, but multiple loans that many people weren’t able to pay off. Since then, the mortgage industry has tightened up; there are more hoops to jump through if you want to get a loan today. Now they know to make sure that applicants are able to qualify for a loan before they’ll issue one.
Simple processes that we take for granted today, like appraisals, weren’t required back during the crash. Today, appraisals are taken more seriously. Even though the market has appreciated, we in the industry are still dealing with many appraisal challenges.
The biggest deciding factor that caused the crash was an overabundance of homes in the market. We had too many homes and not enough buyers. Today, as I’m sure you’re aware by now, we have the opposite problem—there aren’t enough homes on the market to meet the buyer demand. Right now, we have one month’s supply of homes, and each house that we list in the regular price ranges is receiving upwards of 10 offers. Not only that, but these buyers are owner-occupiers, not investors, meaning that they’re buying homes to live in. During the crash, many investors were buying up properties for speculative purposes.
The only thing that seems like it would be capable of slowing our market down would be an increase in interest rates. That would slow demand, but it wouldn’t cause home prices to plummet.
All in all, don’t believe the conspiracy theories about the market heading for a crash. The circumstances surrounding today’s market are vastly different than we experienced back then.
If you have any questions about the market or real estate in general, don’t hesitate to reach out to us. We’d love to speak with you.