I know it’s hard to tell with everything we have going on what is the real story with the market. This is one of the most unprecedented and unfamiliar markets we’ve ever seen. With bidding wars and lack of inventory, many people ask us if we feel the market may crash.
Many people feel this is a bubble and they should just sit out of the market and prices will come down. If you look at real estate long term, we have rarely seen prices fall with the exception of what happened during the housing crisis starting in 2008. Let’s truly compare what happened back in 2006 when we had one of the biggest crashes in American history that affected home prices.
When the housing crisis occurred, 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 nationally, and home builders underproducing relative to historical averages.” When we look locally we had 6,476 houses for sale in May 0f 2008 and peaked at over 7,000 that year. Right now in all of Douglas and Sarpy counties, we have 563 houses for sale. It is supply and demand driving prices. With the low inventory and low rates, that is not going to change anytime soon.
According to the National Association of Realtors Chief Economist Lawrence Yun, he says and I quote “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.
Major contributors to the crash back in 2006 was the fact that stated income loans were being given to buyers. Buyers were being qualified for a loan that they simply could not afford, and in many cases, little paperwork was needed to qualify for a loan, someone would simply “State” what they made and that was considered enough.
There were zero down payment loans. Buyers now are well qualified, putting down money, and are in a better equity position from the start.
That should give us some relief with respect to the housing market and its sustainability. I feel we should all take solace knowing that there are many more factors that lead to the crash of 2006 that we just do not see today.
We expect values to keep increasing in 2021. Danielle Hale, Chief Economist of Realtor.com says about 2021:
“We expect sales to grow 7 percent and prices to rise another 5.7 percent on top of 2020’s already high levels.”
Even Dave Ramsey, a traditionally conservative financial figure, said when asked by a caller if they should sell now and wait to buy “I don’t think this is a bubble, and that is the only reason it would go down.” He then proceeded to say “I don’t see prices going down anytime in the next decade, what that means is every day you step out of the market, the prices are going up, for the rest of your life. It’s a good idea to sell now and buy now.”
So if you’re thinking about selling or buying and taking advantage of this great market and low-interest rates, reach out, to us!