There’s a lot of talk in the mortgage and real estate market about whether the recent run-up in housing prices is a “market bubble” comparable to 2008. While housing prices have increased dramatically in the last 12 months, I’m not convinced this is the same situation. Let’s take a look at some differences:
| 2007 “Bubble” Dominated By: | 2021 Market Dominated By: |
|---|---|
| - 100% Financing (no equity/no down) | - Today, a down payment/ reserves required |
| - Interest only loans (no principle reduction) | - 30-yr Fxd. Principle/Interest loans the norm |
| - ARMs (payment not secure, will adjust) | - Today, 30-yr fxd loans, fully amortized (equity) |
| - Very few cash transactions (leveraged) | - More cash than ever in markets (confidence) |
| - Appraisers pressured by lenders/RE agents | - Appraisers report to 3rd party agency now |
| - Unstable buyers - No credit, no problem! | - More stable buyers - better credit/more cash |
| - Multiple home purchases at once, anyone could be an investor w/ $0 down | - Intent to occupy & large down required for investors |
| - Jobs (growth in construction, tourism (cyclical industries) | - Jobs (growth in health, financial, and Tech industries - less cyclical/diverse industries) |
So, there are some key differences in the market. Mortgage loans are much harder to qualify for, and there isn’t nearly as much speculation in the market as there was back in the housing crisis days. Much of the rise in the market value of real estate has had more to do with populations leaving urban centers during the COVID-19 pandemic, and the fact that the lowest interest rates of all time have given every buyer more purchasing power than they’ve ever had before.
Of course, any market has its ups and downs, and there will be a down cycle in the future. But, the cost of waiting may be detrimental in a rising interest rate environment.
Check out my Cost of Waiting Analysis to see some real figures and what waiting can cost you: https://mcedge.tv/39s6op
If you’d like to discuss this in more detail, please contact me today to get your own Cost-of-Waiting analysis.
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