If you need assistance, please call 914-290-5258

5 Simple Graphs Proving This Is NOT Like the Last Time

Tuesday, March 17, 2020   /   by Vanessa Saunders

5 Simple Graphs Proving This Is NOT Like the Last Time

20200316-KCM-Share-1.jpg

By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate
 
With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008.

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.5 Simple Graphs Proving This Is NOT Like the Last Time | Keeping Current Matters

2. Prices are not soaring out of control.

Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.5 Simple Graphs Proving This Is NOT Like the Last Time | Keeping Current MattersThere’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.5 Simple Graphs Proving This Is NOT Like the Last Time | Keeping Current Matters

4. Houses became too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:5 Simple Graphs Proving This Is NOT Like the Last Time | Keeping Current Matters

5. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:5 Simple Graphs Proving This Is NOT Like the Last Time | Keeping Current MattersDuring the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.

Global Property Systems says:

If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

If you're considering buying or selling a property locally or globally, or need more information, CLICK HERE


  hudson valley real estate, hudson valley property, hudson valley home, lending, the future of real estate, pandemic, the economy

Global Property Systems
Vanessa Saunders MBA MIMC CIPS - NYS RE Principal Broker
56 Lafayette Avenue Suite 320
White Plains, NY 10603
914-290-5258


NY.png

The data relating to real estate for sale or lease on this web site comes in part from MHMLS. Real estate listings held by brokerage firms other than Vanessa Saunders - Global Property Systems are marked with the MHMLS logo or an abbreviated logo and detailed information about them includes the name of the listing broker. The information appearing herein has not been verified by the Mid-Hudson Multiple Listing Service, Inc. or by any individual(s) who may be affiliated with said entity, all of whom hereby collectively and severally disclaim any and all responsibility for the accuracy of the information appearing at this web site, at any time or from time to time. All such information should be independently verified by the recipient of such data. This data is not warranted for any purpose. ©2020 Mid-Hudson Multiple Listing Service, Inc. All rights reserved.
The data relating to real estate for sale or lease on this web site comes in part from One Key, Inc. Real estate listings held by brokerage firms other than Vanessa Saunders - Global Property Systems are marked with the One Key, Inc logo or an abbreviated logo and detailed information about them includes the name of the listing broker.

The information appearing herein has not been verified by One Key, Inc or by any individual(s) who may be affiliated with said entities, all of whom hereby collectively and severally disclaim any and all responsibility for the accuracy of the information appearing at this web site, at any time or from time to time. All such information should be independently verified by the recipient of such data. This data is not warranted for any purpose.

©2020 One Key, Inc. All rights reserved.

The data relating to real estate on this website comes, in part, through the IDX of the Multiple Listing Service of Ulster County, Inc. Real estate listings held by brokerage firms other than Vanessa Saunders - Global Property Systems are marked with the IDX logo and detailed information about them includes the name of the listing broker.