Here’s why today’s market is nothing like the 2007 market.
People keep asking me, “Is the market going to crash?” Every market goes up and down, and our real estate market has been going up for a while now. It can’t sustain this forever, right? Wages haven’t been increasing along with home prices, and we are seeing a seasonal slowdown, but does that mean our market is going to crash? The best way to talk about this is by comparing the market today to the 2007 market.
Back then, we had similarly huge price appreciation. However, we also had predatory lending. They were giving loans to people who shouldn’t have gotten them. The saying back then was: If you could fog a mirror, then you could get a loan. On top of that, interest rates were higher, and there were a ton of adjustable-rate loans.
“Banks are giving good loans now instead of those predatory loans.”
Right now, your credit score has to be 120 points higher than it had to be to qualify for a loan back then. There are approximately 1.6 million homes in forbearance in the United States right now, and 1 million of those homes are predicted to go into foreclosure. However, they also predict that we’ll sell between six and seven million homes next year. The vast majority of our home sales will not be foreclosures.
The reason for this is that people have a lot of equity in their homes. Because there is a lot of equity, there is a lot of cash in the market as well. Banks are giving good loans now instead of those predatory loans.
You might’ve noticed that I didn’t really answer the question. When is it going to crash or is it even going to crash? The truth is nobody knows for sure, but it doesn’t look like it will happen soon. If you have any questions about this or other real estate topics, feel free to call, text, or email me. I’d love to help.