The housing market has been on a rollercoaster lately. For a while it was as hot as the sun and many people were trying to scoop up homes as fast as possible because of the work from home capabilities and the ability to get more out of a home for the amount they were already paying for. In essence, the market now has started easing up a bit, inventory is creeping back up and forbearances are continuing to come down. With that being said, what is the market looking like currently and are we looking at a bubble that we have seen before in 2008. All these questions and more will be answered below:
2008 was a time that the real estate and mortgage industries would love to forget about but simply cannot due to the impact at the time. After all, many lenders were giving out home loans to people who simply could not afford their homes or who didnt have a great track record with their credit. Furthermore, the 2008 bubble was due in part to the high-risk lending practices that were being carried out all across the nation. With the 2008 crash, the result led to many reforms on lending practices and now the housing market has better protections as well as higher standards to utilize in regard to approving someone for a home loan.
The bubble then is not what we are seeing now in today's market. In fact the demand is so high and because of this, it is causing the prices to drive higher and supply to be limited. In the years before 2008, there was a lot more construction being done on homes with many to choose from. Essentially, in the years after the crash construction simply did not keep up with the demand for homes from the younger generations waiting to purchase so this left us with a high demand that made many people believe we were in "bubble" territory, which is simply not true currently in the market.
In combination with the high demand and the low inventory, the next thing we must consider are the low interest rates that we have been seeing and continue to see. When home are more affordable and cost effective for borrowers, the desire to purchase a home gets higher and more incentivizing. This has been a great time for those who have been renting or waiting for the right moment to buy and have the cash on hand for the purchase to jump in on the market that they may not have been able to in the past.
However, with this influx of new borrowers coming to the table to purchase homes, the older homeowners who have maybe refinanced due to the low rates are not necessarily moving away but more so staying put to make sure they maximize the equity out of their homes in this period. This affects the supply of homes that are available to new borrowers and leaves us in sort of a drip cycle of new homes being released and then getting bought quickly or bidding wars on homes being put back on the market.
We have to also consider the lengthy stay-at-home orders that were caused by the COVID-19 pandemic. This caused a huge shift in the amount of business being done in the housing market. Refinances and purchases were flowing and the concept of remote work made leaving the metropolitan areas for more space a top want for buyers. Many neglected to list their homes during the shutdown because of the uncertainty involved which affected supply in that period. Now, as we slowly move out of the pandemic the amount of homes and opportunities to purchase are getting better. Now is still a great time to be looking if you havent started already as well as making note of homes in areas you find work for your family and work life.
Among all the factors at play for what is happening with the housing market, one thing is certain and that is the rate of growth will reach a point where it will ease. We are far from the 2008 crash and with better practices and policies in play now to protect borrowers and the investment banks, high-risk lending is a thing of the past and demand for homes will continue to grow. Now is still a great time to buy, so don't be scared about any crashes in the near future!
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