Thursday, May 6, 2021 / by Capprice Kitchen
Are we about to see a repeat of the 2008 housing crisis? The answer may surprise you!
Today I’m sharing three reasons why we’re definitely NOT in a housing bubble!
Number One: Inventory Is Low!
When we talk about inventory in real estate, we’re basing that on the number of homes for sale compared to how many buyers are on the market. In 2008, there were WAY more homes for sale than there were buyers and when homes should have dropped in pricing, they increased! This meant that thousands of homes sat on the market because demand was low and they were overpriced. In 2020 and 2021, we’re seeing the exact opposite. We’re seeing more buyers than there are homes for sale and homes are naturally increasing because of supply and demand.
Number Two: Demand Is Supported!
In 2008, buyers bought homes out of fear that prices would skyrocket. With no concrete contributing factors, the house bubble burst. In this current market, demand is support by several factors: Millennials are taking the step into home ownership, we’re still seeing record low mortgage rates, and we’re in a seller’s market. The desire to own coupled with the historically low mortgage rates, makes purchasing a home today a strong sound financial decision.
Number Three: There’s Plenty of Equity
In 2008, homeowners treated their homes like ATM machines. There were waves of cash-out refinances which allowed homeowners to leverage their equity. The problems started when prices began to drop and homeowners found themselves in a negative equity situation where the mortgage was higher than the value of their home. This led to many homeowners defaulting on their payments and thousands of foreclosures. Today, cash out refinances are less than a third of what it was compared to 2008. Homeowners are left with lots of equity in their homes and in their back pockets.
The bottom line is supply is still at a historic low, demand is high and motivated, and homeowners have enough equity to weather a dip in home values. The exact opposite of 2008! Thank goodness, right?!
I hope this blog message reassured you that this market is strong and steady and if you’ve been considering buying or selling, now’s the time! If you’re in the Amelia Island/Fernandina Beach area and want to see what your options are, shoot me an email at firstname.lastname@example.org or call at 904.535.3997.