We won’t see a downturn in buyer demand in this market for a while still.

Are we in a housing bubble? Right now we’re seeing rapidly rising real estate prices, and many of us are wondering if we’re heading for another housing market crash. Memories of the crash 12 years ago that ignited a worldwide recession are still fresh in our minds. However, we have to remember that the bubble stemmed from the rise of subpar lending practices.

Stated income loans required very little documentation from potential buyers to prove that they can afford their monthly mortgage payments. Many of those loans also featured adjustable rates that would balloon shortly after an introductory period. Some homeowners were treating their houses as ATMs and refinancing into these risky loans. When the funding stopped, the housing values plunged. Homeowners lost a collective $7 trillion, and more than eight million homeowners lost their houses in foreclosure between 2006 and 2014. It took almost a decade for some markets to recover.

“The current market is definitely not the market of 2007.”

By comparison, today’s market and lending practices are far more conservative. Banks and mortgage lenders have been more disciplined in extending credit. Banks have tightened their underwriting requirements in the wake of the lockdown last year. Buyers are more qualified right now than they have ever been, and we’re seeing more loans with 20% down, which is a great sign for the health of the market.

This real estate market is definitely not the market of 2007. Prices are rising quickly, but the underlying factors are completely different from what we experienced back in 2007. Every housing boom in history has ended with a crash, but there is no sign of that happening anytime soon.

But to answer the question of if and when a crash will come, you must consider that every housing boom in history has ended with a crash. So the answer is probably yes, but not soon. 

If you watched my previous video blog, you know that the current increase in buyer demand that is driving the housing prices up has been from baby boomers’ kids,  the largest demographic wave to ever move through our economy. This boom should last several more years as we build out for the demand from this generation. It may even last 10 years. We will watch it closely. 

Once this wave passes, things will change. There are a few countries now - Italy and Japan in particular, that are dealing with a diminishing demographic as far as buyer demand goes, and it’s pretty wild to see what it is doing to their real estate market. Many homes are sitting empty because there are just not enough people to fill the existing houses with. In Japan, there are areas where it is cheaper to buy a home instead of a vacant lot. 

If you are curious to chat more about the topic, please call me. My direct line is 972-984-0511. In the meanwhile, save some money, get your house in order and don’t be stretched too thin for reserves. If you have any questions, please feel free to call me directly at 972-984-0511. I’m here to help you out.