Why We Won't See a Housing Market Crash: Key Differences from 2008

Concerns about a potential housing market crash often bring back memories of the 2008 financial crisis. However, the current market conditions are fundamentally different from those that led to the crash. Here's why we won't see a repeat of 2008, focusing on the significant undersupply of homes. 1. Existing Homes: A Scarcity of Listings One of the most striking differences between now and 2008 is the number of existing homes available for sale. Back then, there was a glut of homes on the market, leading to plummeting prices and widespread foreclosures. Today, the situation is quite the opposite. The inventory of existing homes is at historically low levels. Homeowners are staying put longer, and many are hesitant to sell, contributing to the tight supply. This scarcity helps maintain home prices and prevents the kind of rapid depreciation seen during the last crash. 2. New Homes: Slow Pace of Construction The construction of new homes also paints a different picture than in 2008. During the run-up to the previous crash, builders were producing homes at an unsustainable rate, leading to an oversupply. Now, despite high demand, the pace of new home construction has been slow. Builders face various challenges, including supply chain disruptions, labor shortages, and rising costs of materials. These factors limit the number of new homes entering the market, contributing to the overall undersupply and supporting home prices. 3. Foreclosures: Significantly Reduced Levels Foreclosures played a central role in the housing market collapse of 2008. At that time, risky lending practices led to a surge in defaults and foreclosures, flooding the market with distressed properties. Today, the situation is much different. Stricter lending standards and higher homeowner equity have resulted in a much lower foreclosure rate. Additionally, many homeowners have taken advantage of historically low-interest rates to refinance and reduce their monthly payments, further reducing the risk of default. Conclusion The housing market today is characterized by a significant undersupply of homes, unlike the oversupply that precipitated the crash in 2008. The scarcity of existing homes, the slow pace of new home construction, and the low levels of foreclosures all contribute to a stable market. While no market is entirely immune to fluctuations, the current conditions suggest that a housing market crash like the one experienced in 2008 is highly unlikely. Buyers and sellers can take comfort in the fact that today's market dynamics are fundamentally stronger and more resilient.

Financial Fundamentals for First-Time Homebuyers

Are you prepping to buy your first home? If so, one of the steps you should take early on is making sure you’re financially ready for your purchase. Here are just a few of the financial fundamentals you’ll need to focus on as you set out to buy a home.Build Your CreditYour credit is one element that helps determine which home loan you’ll qualify for. It also impacts your mortgage interest rate. While there are many factors that go into your mortgage application, a higher credit score could lead to a lower monthly payment in the long run.So how do you make sure your credit is in the best shape possible when it’s time to buy? A recent article from NerdWallet lists a few tips you can use as you work to build and strengthen your credit. They include:Tracking your credit and disputing any errors that show up on your reports.Paying your bills on time. This includes making loan payments and paying down any open lines of credit.Keeping your credit card balances low. Paying more than your minimum monthly balance when you’re able can help.Automate Your Savings for Your House FundYou might also be wondering how you can achieve your down payment savings goals. Bankrate provides buyers with a number of tips to help you save, including searching for down payment assistance programs and ways you can save more, faster. As the article says:“One of the best ways to save for anything — including a down payment — is to set it and forget it. If you receive a regular paycheck, ask your employer to direct a portion of that payment into a savings account. If you’re a freelance worker or independent contractor, set up a recurring transfer from a checking account to a savings account to establish the routine.”Get Pre-ApprovedAs you prepare for your purchase, you’ll also need to have a good grasp on your budget and how much you’ll be able to borrow for your home loan. That’s where the pre-approval process comes in.Pre-approval from a lender lets you know how much money you can borrow for your home loan. And having that knowledge, plus an understanding of your savings, can help you decide on your target price range for a house.From there, you can start browsing for houses online and see what’s available in your area in that general price point. This can help you really understand your options so you can start to picture your future home.For Customized Advice, Build a Team of ProfessionalsFinally, the best way to make you’re prepared for your purchase is to connect with trusted real estate professionals. Having expert advisors in the industry will help you make strong decisions throughout the homebuying process based on your specific goals, finances, and situation. They know the market and can guide you toward the home of your dreams.Bottom LineIf you’re ready to get the homebuying process started, let’s connect so you can begin to build your team of professionals today.

What Makes a House a Home?

There’s no denying the long-term financial benefits of owning a home, but today’s housing market may have you wondering if now’s still the time to buy. While the financial aspects of buying a home are important, the non-financial and emotional reasons are too.Home means something different to all of us. Whether it’s sharing memories with loved ones at the kitchen table or settling in to read a book in a favorite chair, the emotional connections to our homes can be just as important as the financial ones. Here are some of the things that make a house a home.1. You Can Be Proud of Your AccomplishmentBuying a home is a major life milestone. Whether you’re setting out to buy your first home or your fifth, congratulations will be in order when you’ve achieved your goal. The sense of accomplishment you’ll feel at the end of your journey will truly make your home feel like a special place.2. You Have Your Own Designated Happy PlaceOwning your own home offers not only safety and security, but also a comfortable place where you can relax and unwind after a long day. Sometimes that’s just what you need to feel recharged and content.3. You Can Find the Space To Meet Your NeedsWhether you want more room for your changing lifestyle (like retirement, dedicated space for a hobby, or a personal gym) or you simply prefer to have a large backyard for entertaining, you can invest in a home that truly works for your evolving needs.4. You Can Customize Your SurroundingsLooking to try one of those decorative wall treatments you saw online? Tired of paying an additional pet deposit for your apartment building? Or maybe you want to create an in-home yoga studio. You can do all these things in your own home.Bottom LineWhether you’re planning to purchase your first home or you’re ready to buy a different home to meet your needs, consider the emotional benefits that can turn a house into a happy home. When you’re ready to make a move, let’s connect.

What To Expect From the Housing Market in 2023

The 2022 housing market has been defined by two key things: inflation and rapidly rising mortgage rates. And in many ways, it’s put the market into a reset position.As the Federal Reserve (the Fed) made moves this year to try to lower inflation, mortgage rates more than doubled – something that’s never happened before in a calendar year. This had a cascading impact on buyer activity, the balance between supply and demand, and ultimately home prices. And as all those things changed, some buyers and sellers put their plans on hold and decided to wait until the market felt a bit more predictable.But what does that mean for next year? What everyone really wants is more stability in the market in 2023. For that to happen we’ll need to see the Fed bring inflation down even more and keep it there. Here’s what housing market experts say we can expect next year.What’s Ahead for Mortgage Rates in 2023?Moving forward, experts agree it’s still going to be all about inflation. If inflation is high, mortgage rates will be as well. But if inflation continues to fall, mortgage rates will likely respond. While there may be early signs inflation is easing as we round out this year, we’re not out of the woods just yet. Inflation is still something to watch in 2023.Right now, experts are factoring all of this into their mortgage rate forecasts for next year. And if we average those forecasts together, experts say we can expect rates to stabilize a bit more in 2023. Whether that’s between 5.5% and 6.5%, it’s hard for experts to say exactly where they’ll land. But based on the average of their projections, a more predictable rate is likely ahead (see chart below):That means, we’ll start the year out about where we are right now. But we could see rates tick down if inflation continues to drop. As Greg McBride, Chief Financial Analyst at Bankrate, explains:“. . . mortgage rates could pull back meaningfully next year if inflation pressures ease.”In the meantime, expect some volatility as rates will likely fluctuate in the weeks ahead. If we see inflation come back under control, that would be good news for the housing market.What Will Happen to Home Prices Next Year?Homes prices will always be defined by supply and demand. The more buyers and fewer homes there are on the market, the more home prices will rise. And that’s exactly what we saw during the pandemic.But this year, things changed. We’ve seen home prices moderate and housing supply grow as buyer demand pulled back due to higher mortgage rates. The level of moderation has varied by local area – with the biggest changes happening in overheated markets. But do experts think that will continue?The graph below shows the latest home price forecasts for 2023. As the different colored bars indicate, some experts are saying home prices will appreciate next year, and others are saying home prices will come down. But again, if we take the average of all the forecasts (shown in green), we can get a feel for what 2023 may hold.The truth is probably somewhere in the middle. That means nationally, we’ll likely see relatively flat or neutral appreciation in 2023. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:“After a big boom over the past two years, there will essentially be no change nationally . . . Half of the country may experience small price gains, while the other half may see slight price declines.”Bottom LineThe 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. The best way to keep a pulse on what experts are projecting for next year is to lean on a trusted real estate advisor. Let’s connect.