Is the bubble going to pop?
Do I remember what happened in 2008?Is this a repeat of all of that? These are all questions I get regularly, and since last Spring, they are real concerns for anyone who happened to be paying attention the real estate market. The quick and easy answer is “no one knows for sure”. But there are some things we can look at that may help us intelligently predict what to expect.
Last Spring many of us experienced de ja vu. The market was on fire and prices were skyrocketing and there were many similarities between the 2020-2022 market and the the 2006 & 2008 bubble popping.
This is not the same!
Anyone looking to buy a home was worried about the “impending doom” and the possibility of being upside down in their home. When it happened in 2008, it took many years of payments to dig home owners out, and many others lost their homes to foreclosure or had to short sell.
Predatorial Lending
Part of the root cause of those tragedies was lending practices that were in place. Some banks were allowing unqualified borrowers to purchase. There were also many high loan to value rates and people were moving into homes with large amounts of negative equity. (See next weeks entry)
After the burst, the federal government had to get involve to prevent a repeat. Part of the solution was the Dodd-Frank Act. This included federal regulation that prevent the lending practices that lead the series of events that caused the housing market crisis.
Today’s hot market and the higher pricing is based on supply and demand, low interest rates and basic economic principles. Prices have leveled off and the appreciation of homes has slowed dramatically but we simply haven’t seen the “Pop” some were expecting.
DEFENSE..DEFENSE
Home owners today have equity and there are more buyers than homes on the market. Those factors along with lenders being carefully regulated prevent the real estate roller coaster to crash like it did in 2008.
If you want more information, this subject is something I really like discussing. It happened in 2008 around the same time I bought my first home, and it certainly contains a lot to unpack.
Welcome Home
Chris Whitehurst
Berkshire Hathaway-RW Towne Realty
252 312 2263