If you aren’t aware of how insane our real estate market has been over these past few months, you’ve probably been living under a rock. Homes have been flying off the market, and home values are spiking. This kind of activity prompts the kinds of questions I’ve been receiving a lot lately: When is the bubble going to burst? Will we see a repeat of 2008? Here are five reasons why we probably won’t see anything happen with home values for the next 12 to 24 months:
- Many homeowners don’t even have loans on their property. Over 38% of homeowners own their homes free and clear, which is a strong pillar underneath the housing market.
- Sound economic principles. Unlike the period of 2007 to 2009, supply and demand are acting quite natural. Supply is extremely low, and demand is extremely high, which is the complete opposite of what we saw during the lead-up to the Great Recession. Home prices are going up, and we’ll probably see that continue for a while.
- Home equity. Right now, the average homeowner in the U.S. has more than $200,000 in equity, which is an unprecedented amount.
- Higher lending standards. Unlike the period of 2007 to 2009, lenders are much more critical with borrowers. They’re going the extra mile to ensure everyone has the availability to repay. Those suspect ‘stated income loans’ are a thing of the past.
- Forbearance. Basically, this is where a lender allows a borrower to put their payments on pause. While a lot of homeowners took advantage of these government-backed initiatives last year, 85% of those borrowers have come out of forbearance, either repaying the balance in full or enacting a special type of payment plan to get caught back up.
Supply is extremely low, and demand is extremely high, which is the complete opposite of what we saw in ‘07 and ‘08.
Hopefully you now feel a little bit better about where the real estate market is headed. If you have further questions about this or any other real estate topic, don’t hesitate to reach out by phone or email. I’d love to hear from you soon.