Do you remember the 2008 real estate market crash? Many people are wondering if we are going to have another market crash here in Seattle, Washington, or in other real estate markets around the country.
The market is certainly frothy – with bidding wars and lack of inventory, especially in the entry-level price points just above a half a million dollars, many people are asking if we feel the real estate housing market is likely to crash.
You know the saying, “What goes up must go down…”
I understand how scary it can be thinking about what to do, I own property here and investments across the country, I’m in the market just like you.
I’m Emily Cressey with HomePro Associates at HomeSmart here in Seattle. After buying and selling many properties myself over the years, I can tell you this is a very unpredictable time.
But let’s compare what really happened back in 2006 when we had one of the biggest run-ups (and then crashes) in American history.
According to the National Association of Realtors Chief Economist Lawrence Yun:
“Such a frenzy of activity, reminiscent of 2006, raises questions about a bubble and the potential for a painful crash. The answer: There is no comparison. Back in 2006, dubious adjustable-rate mortgages taxed many buyers’ budgets. Some loans didn’t even require income documentation. Today, buyers are taking out 30-year fixed-rate mortgages. Fourteen years ago, there were 3.8 million homes listed for sale and home builders were putting up about 2 million new units. Now, inventory is only about 1.5 million homes, and home builders are under-producing relative to historical averages.”
National Association of Realtors Chief Economist Lawrence Yun
So let’s break this down.
First, Yun said said, “There is no Comparison” between now and 2006.
Then he said, one of the major contributors to the real estate market crash back in 2006 was the deployment of “stated income” loans which put people in houses they could not really afford.
Buyers were being qualified for a loan normal lending guidelines would not have allowed them to get. In many cases, little paperwork was needed to qualify for a loan, and buyers could simply “state” what they made and that was considered enough evidence of income.
That is NOT the case now!! Lenders pretty much want you first born child in order to approve you, they go above and beyond in qualifying buyers for a loan and making sure they have the means to pay.
That should give us some relief in respect to the housing market and its sustainability.
Also, homes appraising at exceedingly higher values from one week or one month to the next, had a significant impact on the market crash, that is just NOT happening anymore. There are stringent guidelines for appraisals and the amount a bank will lend for a home. In fact, many buyers who are currently paying way more than the listing price of a home are promising buyers they will pay the overage if the home does not appraise for full value.
I feel we should all take solace knowing that there are many factors in play leading up to the real estate market crash of 2008 that we just do not see today.
This is Emily Cressey with HomePro Associates at HomeSmart Real Estate here in Seattle, WA and I’m always here to help get you the information you need to make smart decisions. Reach out anytime even if you’ve just got questions. Remember, we are here to serve.
