A BUBBLE ON THE HORIZON?! Not so fast….🧐
Allison & Deb are here to shed some light on how today’s market is nothing like the housing bubble of 2005-2008!
Is there a housing bubble on the horizon? Will there be a housing crash like in 2008? These questions continue to pop up and we’re here to look at the facts and provide you with an educated market opinion.
- 2008’s interest rates were “adjustable rates”
- Meaning mortgage payments would adjust depending on the interest rate at the time
- When interest rates went up, homeowners’ mortgages would increase as well which lead to an increase in foreclosures.
- Today’s interest rates are “fixed rates”
- Meaning mortgage payments do not adjust with the interest rate
- Since the rate is fixed, or “locked” Homeowners know exactly how much their mortgage will be each month and can financially plan for their payments.
Down Payments & Financing
- In 2008, most home purchases were 100% financed.
- Homeowners had no equity in their homes from the start
- Today, purchasers are putting significant amounts of money down, so they have high equity in their home from the start
- In 2008, the buyers were very unstable
- They had no credit, Bad credit, or a stated income
- Today, buyers are more financially stable
- Buyers today have stellar credit and high income
- In 2008, the majority of loans were short term loans with interest-only payments
- Purchasers had low payments, no principle reduction, and a large balloon payment at the end of a short-term loan
- When loans were converted to include principle, the payments were often doubled.
- Today, principal & interest are built into the mortgage
- Principle reduction is built into the payment
New Home Development
- In 2008, builders were putting homes up faster than the population growth for 10 years
- There was a growing labor force in construction
- Today, new home development is struggling to keep up with population growth for 10 years
- Labor shortage and supply chain disruptions dominate builder issues
- In 2008, false demand was being fueled by flip investors
- Flip investors bought and sold to each other with risky loans
- There was no intent to occupy or rent
- Today, real demand is fueled by institutional landlords purchasing with cash who intended to rent to the population
- Intent to occupy with a renter or owner
In short – the market is unpredictable and we never know for sure, however, based on the numbers and statistics we can confidently assume that there will not be a housing crash for the reasons stated above. The demand for homes in AZ is still high and the supply of homes is still limited.