Real estate watcher and market predictor Keeping Current Matters has published some valuable graphs that will allay some fears that consumers have. Fears that the super hot Chicago North Shore market will create another bubble - like the pre-recession period leading up to 2007-8.
Covid is one factor which stimulated the rush to buy, but there were key characteristics of that period that are simply not present this time.
Mortgages were extremely easy to get back then and lenders were willing to take on high levels of risk. Not so now where qualifying for a loan is much harder.
Homes in Chicago's North Shore communities of Winnetka, Wilmette, Kenilworth, Glencoe, and Northfield are selling very quickly. But the pace of inflation is much lower.
This graph shows the amount of appreciation for the four years leading up to the housing bubble and the last four years. Home prices have risen but not nearly at the rate they did pre-crash. Note that these are national numbers and won't approximate our rates.
For Winnetka, Wilmette, Kenilworth, Glencoe, and Northfield combined the inflation from 2019 to 2020 was 5.7%. To read more and see the rate of inflation for each village, please see my post: What Exactly Happened in the North Shore Housing Market in 2020?
WE HAVE A SHORTAGE OF HOMES, NOT A SURPLUS
In 2007 we had too many homes on the market, we now have too few. A normal and balanced market is around 6 months (for all homes to sell without any new ones coming on the market.) Currently, for Winnetka, Wilmette, and Glencoe the number is in the 3s, while Kenilworth has 8 months supply and Northfield is almost 6 months.
THUS HOUSES ARE NOT TOO EXPENSIVE TO BUY
The percent of income needed to purchase a home is much lower now than in 2006. This is because while prices are still relatively high, wages are higher and the mortgage rate is much, much lower.
HOMEOWNERS ARE NOT TAPPED OUT
Remember the term "homeowners using their homes as personal ATM machines." They withdrew their equity as soon as it built up to disasterous results. Today, while people have good equity, they are not depleting it.
I think these graphs are sufficient evidence to show that in several areas of concern we are not repeating ourselves.
While you're here, please see:
Bubble mage by Alexandra ❤️A life without animals is not worth living❤️ from Pixabay