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2008’s Housing Bubble VS Today’s Market

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.

Interest Rates:

  • 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

Buyer Status

  • 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

Loan Payments

  • 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

Occupancy

  • 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.

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