February 1, 2023
I have heard so many people say "This housing market is going to crash! It's just like 2008!" Here's the thing though. Today's market is quite different than 2008.
If you've ever seen the movie, The Big Short, with Brad Pitt and Ryan Gosselin, then you know that the 2008 bubble was due to banks giving out subprime mortgages. My explanation is super simplifying the whole situation, because not only did they give HUGE mortgages to people who didn't qualify (think about the stripper who bought a million-dollar home in the movie).
To make matters worse, they bundled these high risk mortgages with other mortgages and sold them off and that is what was backing everything (mortgage-backed securities). So basically, they took crap, rolled it up with a little gold and silver, and sold those to agencies that would sell them as investments to people. It's like Jenga. When the wrong little block is pulled out, the whole thing crumbles. And that's exactly what happened.
So then what he heck is happening right now?
Right now, it's a matter of demand and supply. The supply is low and the demand is high so prices are extremely high and competitive. The banks are still stringent on their loans, and there are a lot of cash purchases happening.
Why is there such a high demand right now?
Well, people that used to have to live in a certain area because of their job, no longer have to do that. Many people are switching to remote work because COVID proved that people can still be productive, even from home. People are typically keeping their old homes, too, in case they want to move back. Therefore, new houses aren't being added to the market.
Additionally, even before COVID, the building of houses was not keeping up with the pace of the number of families being started. There was an estimated shortage of 5 Million houses, even before COVID.
The good news is this-- things do seem to be slowing down and leveling out. People are finally able to buy houses BELOW asking price-- hooray! Yes, the Feds did just hike up interest rates to deter people from buying right now. But you can still buy now, and refinance when rates drop again. OR, select a smaller home so that it is still within your budget, no matter what the interest rate is at.
Let me know what your concerns are with this housing market! Email me at: email@example.com