FACT VS FICTION: THE TRUTH ABOUT TODAY’S HOUSING MARKET
Most of you already formed an opinion of the market because of what you see in the media.
Here are the biggest misconceptions about today’s housing market
#1: WE’RE IN A HOUSING BUBBLE
While today’s housing market is anything but normal, it’s not because of the same circumstances surrounding the housing bubble of the early 2000s that caused the crash.
Today’s market is nearly the exact opposite.Since the housing crash of 2008:
- Lending standards have tightened
- The market is under-supplied rather than over-supplied on inventory
- Most homeowners are much more cautious with their equity
Plus, housing market experts are forecasting continued price appreciation this year, as demand continues to outweigh home supply.
#2: LOTS OF FORECLOSURES ARE COMING
Stories about the volume of foreclosures are all over the news today. But the most important thing to remember is context is everything.
Yes, many homeowners were able to pause their mortgage payments during the forbearance program, and there was legitimate concern from many experts that it would result in a wave of foreclosures coming to the market.
However, the number of foreclosures we’re seeing today is nothing like the last time. Here are some of the reasons why that’s happening:
- Most homeowners have enough equity to sell their homes
- There have been fewer foreclosures over the last two years
- The current market can easily absorb the new listings
Today’s data shows that most homeowners are exiting their forbearance plan either fully caught up on payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again.
For all of these reasons, experts don’t anticipate a wave of foreclosures that would negatively affect housing prices.
#3: HOUSING PRICES WILL DEPRECIATE
This might be one you’ve heard a time or twenty.
Skyrocketing price appreciation has many sellers and buyers sitting on the fence. However, experts don’t project home prices to go down anytime soon. Instead, data from earlier in the year has already been adjusted to be higher than previously anticipated.
So, how do you help answer this question? First American explains it like this:
While house price growth is expected to moderate from the rapid pace of 2021, strong home buyer demand against a backdrop of historically tight inventory of homes for sale will likely keep appreciation positive in the coming year.”
For both buyers and sellers, this means one thing: playing the waiting game is a risky business.
When it comes to sellers, the higher price appreciation over the last two years has been great for their home’s value. But if they’ll also be buying a home after selling, they shouldn’t wait for prices to fall.
In both cases, waiting will only cost more in the long run because climbing mortgage rates and rising home prices will have an impact on their next home purchase.
#4: RECESSION AND HOUSING CRISIS
That’s the one thing that every homeowner today needs to know. Everywhere you look, experts are warning we could be heading toward a recession, and if true, an economic slowdown doesn’t mean homes will lose value.
The National Bureau of Economic Research (NBER) defines a recession this way:
“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”
In summary, history proves a recession doesn’t equal a housing crisis.
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provided by: Keeping Current Matters
