Here’s why our market is different from what happened in 2007.
People ask me all the time: “When is the next housing bubble?” Today, I want to clear the air and answer this question. This is a pretty complicated topic, but I think the best way to tackle it is to compare the market of 2007 to our current situation.
Whenever there’s a bubble in any sector of the economy, it’s because something or somebody is overleveraged. This is exactly what happened in 2007, when banks were making predatory loans to people who could not afford them. We also saw a ton of adjustable-rate mortgages, so when the market did crash, more people felt it.
In contrast, we’re seeing a ton of cash buyers in our current market. Whether they’re using the equity in their homes or just saved for a long time, our market is flush with cash. On top of that, we’re in the middle of a pretty severe inventory crisis. The pandemic made things worse, but we would have had low inventory even without it.
On top of that, the interest rates in 2007 were pretty high. Meanwhile, they’re at historic lows today. Banking regulations are also a bit stricter, so there aren’t the kind of predatory loans we saw in 2007.
Another thing to keep in mind is the end of the forbearance period. About 1.6 million homes are in forbearance right now, and about 1 million of those are expected to face foreclosure. Now, it’s never a good thing that 1 million people could lose their homes, but as far as our market is concerned, this is nothing to worry about. Our inventory is so low that 1 million extra homes will hardly make a dent nationwide.
With all these factors, I don’t see our market as a housing bubble, and I don’t expect anything to pop soon. If you have any questions about today’s topic, please give me a call. I am always willing to help.