What are the top 10 things you need to know before getting your VA home…
Is The Housing Market Going To Crash?
One of the hottest topics for discussion right now and a question I literally get asked about once or twice a week is…….. Aaron, is the Housing Market going to crash and is now a good time to buy a home? I also have had several people say, we are going to wait….. We think it will go down. My first question is why do you think that? Well my dad said so or I just think it will happen again without having any data to back up their decision. Only to find out the type of home they were eyeing is now $60,000 more as opposed to what it was 6 months prior. So let’s take emotion out of the equation and look at some real life data and numbers as to why the market is not going to crash.
Immediately and if you were old enough to remember, visions of the housing crisis from 2007-2010 come to mind and people using their dogs name to qualify for multiple different properties. (If you have never watched it, I highly suggest watching the film The Big Short!)
So, back to the question, are we in a housing bubble? Is the market going to crash? I like to use real data and not just touchy feely ideas or thoughts.
2007 to 2010 was due to bad loans! Plain and simple. Allowing someone to put no money down on an investment property without proving income and a 580 FICO credit score is not going to end well. And well, it didn’t! At all as we now know! Lending regulations were way too loose and the majority of these loans were what is considered “Subprime” home loans. As a matter of fact, the percentage of subprime loans we saw increased from the mid single digits to as high as 20% between 2004 and 2006! This eventually led to borrowers not being able to pay their bills and as a result, caused the domino impact that we saw on homes and crushed the market!
Fast forward to 2022 and regulations are much more strict for loan qualifications. The majority of loans now have to fit into the bucket of what is known as “Qualified Mortgages” or QM loans. What’s this mean? Well instead of saying hey I make $7500 a month in gross income, we have to prove it! We are required to get W2’s, tax returns, paystubs, and written verification of employment from your employer that all support and match up with your income. In 2022, borrowers are a lot less likely to default on their mortgages now due to the required documentation and verifications that are required on every loan nowadays.
SUPPLY VS DEMAND- Economics 101.
Real Estate is still and will continue to be one of the best wealth building investments you can have to help create long term wealth. As a matter of fact, over the past 60 years, home values have only declined 8 times over those past 60 years. Take a look in the chart below and see how the crash in 2007 impacted values. As you can see, we had a roughly 30% decline in values.
Builders stopped building homes in 2010 and as a matter of fact, we have not been able to catch up with the demand that is needed for housing. Mellienal Demand is up and generation Z right on their heels. Supply Can’t keep up with the demand!
Is there a recession in the near future?
Currently in April of 2022, 99% of Wall Street is banking on a recession in as little as the next 7 to 9 months and most definitely within a year. The Federal reserve has been steadily raising rates after our economy has woken up from the last 2 years of Covid. We need to remember that when the Fed jumped in in March of 2020 and purchased trillions of mortgage backed securities to keep our economy from collapsing and to keep mortgage interest rates low. Those rates were artificial.
Here is the thing, the historic interest rate over the last 50 years is almost 9%! We are still at historical lows. So if you can buy a home and have positive equity being built up, guess what? You can still refinance to a lower rate later. There is no law that says you can not refinance multiple times! So if you wait to get in the ring of home ownership, you are potentially missing out on thousands of dollars of potential equity that helps you and your family build long term wealth!
The current War in Ukraine will not help out the economy either and can have an impact on more of the supply chain issues as well that we are seeing.
So, are we in a housing bubble? All the data and numbers point to not any time soon at all!
If you are on the fence, and want to have a conversation about purchasing a home, consolidating debt or heck just want some simple answers to your questions. Heck, reach out to us. It doesn’t cost a penny to talk!