3 Reasons Why We Are NOT Heading Toward Another Housing Crisis
Let's examine the reasons we are NOT heading towards another recession/housing crisis.
Almost daily, I receive a call, text, email or Facebook or LinkedIn private message - "What is going on with the market? Are we headed towards another crash?" or "Is another recession in our near future?" or something akin to those questions. I can't tell you how many people I have reminded NOT to listen to the 'talking heads!' Seriously, that's all they are - they are speaking in general terms without any relevant data to back up their theories.
It's very frustrating to an industry that is accustomed to combating the negatives, normally; we don't need the help of the media or other 'talking heads' who truly have no clue just how local our industry really is.
With home prices softening a bit, I can understand, to some degree, that there may be a concern that we may be headed 'toward the next housing crash.' However, we are in a TOTALLY different market than we were during the bubble market we were in, twelve years ago.
Here are the three key metrics that will explain why we are NOT heading toward another housing crisis:
1. HOME PRICES
A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2012). Today, prices are not depreciating, rather the level of appreciation is simply decelerating.
Home values are no longer appreciating annually at a rate of 6-7%. However, home values have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values will continue to appreciate through 2019. It will just occur at a slower & lower rate. This is great news for home buyers who are nearing being priced out of the market.
In fact, many Charlotte home buyers have already been priced out of the market and many more would be if the rate of appreciating continued at the fast pace it was over the past 3-4 years. A correction perhaps? I believe so but, it's a necessary shift to help neutralize the market.
2. MORTGAGE STANDARDS
Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is absolutely NO proof that today’s standards are anywhere near as lenient as they were during the period leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a quarterly index, measuring the percentage of home loans that are likely to default. Last month, their January Housing Credit Availability Index revealed:
“If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”
3. FORECLOSURE INVENTORY
During the last decade, distressed properties (foreclosures and short sales) made up 35% of all national home sales. The Mortgage Bankers’ Association reported last week, that we currently have the lowest level of foreclosures in process since 1996 - less than 1%. That, to me, speaks the strongest to the point, we are nowhere near a recession.
Real estate statistics/data is hyper-local. It always has been and will continue to be. Consult a local Realtor® for the local facts.
After using the three key housing metrics to compare today’s market to that of the last decade, it becomes crystal clear that the two markets are simply nothing alike. Again, we are likely in the midst of a much-needed market correction, taking real estate to a more neutral market than the sellers' market we have been experiencing since 2013.
© Debe Maxwell | The Maxwell House Group | RE/MAX Executive | CharlotteBroker@icloud.com | 3 Reasons Why We Are NOT Heading Toward Another Housing Crisis
*Data above provided by Keeping Current Matters
Originally posted at https://www.icharlotterealestate.com/3-reasons-we-are-not-heading-towards-another-housing-crash/