Are fears of a housing market crash keeping you up at night?

Are fears of a housing market crash keeping you up at night? If they are, you aren't alone. A lot of clients have recently reached out to me expressing concerns about housing values. What’s the point in buying or selling if prices are about to crash soon just like they did in 2008? Fortunately, I believe our housing market isn’t going to crash anytime soon, and I have five main reasons why. 

First, the supply of homes is simply much, much lower than it was leading up to the ‘08 crash. There are still plenty of buyers out there for the number of homes in our market. Supply has increased, but statistically we are still in a sellers market. Our inventory was so low before, that tons of homes would need to flood the market for an extended period of time to dramatically change housing values. Although homes are taking longer to sell, we are not seeing a drastic change in inventory levels. 

The second thing is that mortgage standards were extremely relaxed from 2005 through 2008. The government and banking industry stepped in, and they tightened the requirements. Before, you could get a mortgage practically just for having a pulse! Since then, you need to have reasonable credit, and you usually have to put some money down. Most buyers in recent years have put down 20%. Others have paid more or even purchased with cash.

Third, financing is still readily available to buyers today. Rates may not be as advantageous today as they were 9 months ago, but a qualified buyer can still get a loan without giving away their first born naming rites! Many people forget back in 2008 financing nearly dried up overnight. Practically the only loans available FHA for a number of years and the loan limit was around 500k. That didn’t serve a vast majority of our local inventory.

Fourth, the foreclosure volume is nothing like it was in 2008. We still have historic low foreclosure numbers. Back then, people were getting foreclosed on all the time, which flooded the market with homes and tanked housing values. However, now people have a TON of equity. Even if they can’t make their payments, they can just sell, avoid foreclosure, and still have money leftover. I can promise you this, if we were to enter a foreclosure crisis again in the future, it would not be handled like the last one. 2008 was a textbook example of how not to handle a foreclosure crisis!

Lastly, our region's economy has VASTLY changed since we started recovery in 2012. In 2008, we talked a lot about Microsoft, Boeing, and Costco. The region's now largest employer Amazon was just starting to create a buzz. Google, Facebook, Twitter and other tech companies were all solely based out of California and did not have a local presence. I am not saying we are completely insulated from a pullback or the effects of recession, but if we hit one, we will be the last ones in and the first ones out.

Overall, I’m cautiously optimistic about our housing market, but it’s important to remain realistic & flexible. Could prices still push down? It's reasonable to me they could, but I believe we have done a majority of the pricing reset at this point and we are very close to equilibrium. Any additional adjustments from here will likely be interest rate based.