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Three Reasons Why This Isn’t Another Housing Bubble

With all the hype regarding home values over the past couple years, a lot of people are worried that we are in another housing bubble. As the market shifts, it’s easy to have concerns that things may turn the way they did in 2008. On the contrary, there is some serious data indicating that our current market is nothing like 2008.

There Is Still a Shortage of Homes For Sale and Not a Surplus

A “normal” real estate market will have enough homes in inventory to last approximately six months. Anything over that is a surplus that will cause home values to drop and anything above that is a shortage that drives prices up.

The below graph pulls data from the National Association of Realtors that shows the market still only holds enough inventory for three months. In contrast, there was more than three times the inventory during the housing crisis in 2008. Low supply combined with continued high buyer demand is a telltale sign that prices are going to continue to stay strong.

Standards of Lending Remain Strong

Leading up to the housing crisis in 2008, brokerages significantly lowered lending standards in order to create an artificial housing demand. This lead to a wave of defaults and foreclosures which flooded the market with additional home inventory and drove home prices down.

Today, lending standards remain strict for both mortgage products offered and borrowers’ credit. The graph below illustrates the Mortgage Credit Availability Index published by the Mortgage Bankers Association. The higher the index, the easier it is to qualify for a loan. A low index, like there is today, helps avoid mass foreclosures like what was experienced in 2008.

The Number of Recent Foreclosures Is Significantly Lower Than During the Crash

Homeowners today hold a great deal of equity rather than being overextended like in the lead-up to the housing crisis in 2008. At that time, homeowners had been leveraging equity for personal cash flow and when home values fell, many were faced with situations of negative equity. 

Additionally, homeowners today are more qualified than ever and far less likely to default on their loans. The graph below tracks annual foreclosure filings indicating that current lending standards combined with strong homeowner equity have driven default rates to a minimum.

The Takeaway

Hard data is showing that the market is not near any of the crash risk levels that were experienced in 2008. We say cash in on the equity and move into the investment of your dream home!

WE CAN MAKE THE SALE OF YOUR CURRENT HOME 100% CONTINGENT ON YOU FINDING THE HOME OF YOUR DREAMS AND IF YOU DON’T FIND IT, YOU DON’T HAVE TO MOVE.

Let us streamline the process of maximizing the profits on your current home and get you into the home of your dreams! Our direct line is (714) 632-7444 or send an email to office@UltimatePropertiesSold.com.

Our company is much more than your usual resale company. We are a premier new home sales company with over 35 years’ experience selling throughout Southern California.

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