There’s no shortage of housing market predictions swirling around these days. Experts continue to speculate about what the housing market might do during the second half of 2020 as a result of health concerns which, in turn, led to business closings and physical distancing measures. The uncertainty surrounding COVID-19 has many questioning the health of our local housing market. While we do not yet know the full extent of economic repercussions that may result from the coronavirus pandemic, we do know that our current situation is different from the one caused by the mortgage credit bubble in 2008. 2008 -- NOT ENTIRELY A SURPRISE Contrary to how it may have felt at the time, the collapse of the housing market in 2008 did not happen overnight. The signs that a correction was coming were all there as early as 2005. Greed and lax regulatory requirements in lending and banking created a situation that was unsustainable, because it was artificially inflated. In 2008, the house of cards upon which the housing market had been built came tumbling down. This naturally had an effect on financial markets, but the cause of the fall was rooted in the housing industry. On the other hand, in early 2020, all metrics indicated a healthy & vibrant economy. But for the pandemic, the likes of which haven't been seen in more than a century, we have every reason to believe the underlying economy is still strong. The root cause of our issues today is something different altogether ... a global health crisis.
2008 -- FORCED NECESSARY CHANGES If you have tried to buy a home in the last ten years, you know it is not an easy process. But prior to 2008, it was a fairly simple process, because there was little oversight and buyers could exaggerate on things like income, assets, and liabilities. Buyers today must prove their ability to qualify for & repay their mortgage loans, and adhere to rigorous lending requirements that became law in the wake of 2008. Verification of employment and income will continue right up until closing day, so it really would be quite a feat to pull the wool over the eyes of an underwriter working in the mortgage business today.
SUPPLY ... DEMAND ... EQUITY, OH MY! With more buyers re-entering the market these past several years, we have consistently seen fewer homes available for sale. This creates demand, and builders have scarcely been able to keep up with that demand for housing. In 2008, there was an over supply of homes on the market due to false or imagined demand. Today, we don’t have enough homes on the market for the number of people who want to buy them. Similarly, in 2008, Americans in general had precious little equity in their homes. Being able to get in a house for virtually nothing, and not having to prove ability to pay, created an atmosphere ripe for fraud. Naturally, this made it easy to walk away from a home upon the realization that the property was suddenly worth less than was still owed on it to the bank. But today, according to a 2019 Forbes report, 37% of all homes in America are owned outright, with no mortgage debt at all. Homeowner equity is at an all-time high. In fact, by late 2019, borrower equity had more than doubled since the housing recovery began more than a decade earlier. And that, folks, makes a compelling case for housing market strength. I provide all of the above information to you for one reason only. I want you to have all of the facts, regardless of whether or not you are thinking of buying or selling, and even regardless of whether you choose to use me when you do! Of course, I'd love the opportunity to earn your trust and business. But more important than that, I just hope you're well. Keep shining, and have a great week!