Ever since we have been continuously hitting a new record high for real estate sales, people have been talking about the major 'crash' that is expected to hit as a result. People fear this due to the traumatic crash the U.S. experienced in the 2000's.
However, today's real estate market is much stronger and could stay this way for years to come. Here's why:
Major Shortage of Homes
Since you're reading this, I am sure you have been somewhat keeping up with the current housing market and are well aware that there are nowhere near enough homes on the market for all of the active homebuyers. Home builders were producing massive amounts of new homes that were already built by the time the recession of the 2000's hit. Once the recession did hit in 2008, the new homes sat empty because no one was able to afford them. This negatively affected the housing market by dragging their value down.
In today's market, we have the opposite issue. There are not enough homes on the market and builders are maintaining a steady flow of producing new homes to avoid another crisis. Since the supply of homes is extremely low, the demand continues to increase along with the value of homes.
2. No Credit Boom
Unlike the 2000's, banks have now adopted much stricter lending standards for those who are purchasing homes. This has lead to the lowest ratio of real estate loans to total loans for commercial banks since the 1980's.
Ultimately, this means that the boom in today's real estate market is actually due to supply & demand from residential homebuyers.
3. Homes are More Affordable
Okay, now this might really surprise you... but mortgage payments are currently more affordable than ever. Even though we continue to see home prices rising, the low mortgage rates is what consistently fuels this real estate market. In fact, rates (or home prices) would need to nearly double in order to put us in a similar position to the 2000's.
To sum things up, we clearly learned our lesson from the 2000's. And although it was a traumatic experience, it is incorrect to associate a strong real estate market with a nationwide recession. In fact, many studies show that the housing market is so strong that it could be the solution to a recession if one were to take place. Now is still a great time to buy & sell real estate. Actually, it might be the absolute best time ever.
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