Another common question ❔ we are getting is, Is what happening now going to be like what happened in the 2008 housing market crash? 🤷♂️
This is Carlitos Zapata with PITBULL REALTY 👋
If you look at annual home price 💰 appreciation six years leading up to the 2008 crash 📉 from 2000 to 2005 we saw an increase from 6.5% to 12.5% which is significant 😲, but if you look at annual appreciation from six years 📅 prior to now from 2014 to 2019 home price appreciation only ranged from 4.4% to 6.4% which is nowhere near the high levels 🔝 of appreciation prior to the 2008 crash.
Really the highest year in the last six years is not even 🚫 equal to the lowest year leading up ➡️ to the housing crash 🏠. Meaning we haven’t had aggressive 😡 levels of appreciation over the past six years 📅, it’s been more normal.
Also, if you look 👀 at this graph from the Mortgage Bankers Association if you look at the Mortgage Credit Availability Index 📝, meaning how easy it is to get a loan 🤝, if you look at the peak on this graph in 2006 📊, the taller the graph the easier it is to get a loan 💰if you look at the crash 📉 at the time of the housing 🏠 bubble, the graph was high ⬆️, so it was easy for people to get a loan during the crash, but now if you compare how easy it is to get a loan, on the left side ⬅ of the graph, but now it is much more difficult to get a loan and qualify. 😬
Lastly, back in the crash in 2007, we had 8.2 months 📅 of supply of inventory on the market, and we know 🤔 that having any more inventory above six months puts us in a buyers 💲 market, and now today we only have 3.1 months of inventory 🛒which means we are in a seller’s 💲 market. Also, right now if we look at this graph 📊 showing the Total Home Equity Cashed Out, by Freddie Mac, back during the crash📉 , we had 824 Billion dollars of money 💵 refinanced on their homes 🏠, now we only have 232 Billion, so we have more equity in our homes now.
During the crash 📉, people were buying cars 🚘 and boats 🚤 and using their homes as an ATM 🏧, they were financing their lifestyles. Today consumers are treating equity very differently today ⬇️. And now today 53.8% of homes 🏠 have at least 50% equity today. In 2008 homes were leveraged to the till and people 👥 owned more than they were worth 💲 so they were walking away 🚶♀️, but today when people have so much equity in their homes they are not 🚫 walking away.
Lastly according to Zillow and NAR, in 2008 the Percent of Median Income needed to purchase 💰 a home was 25.4% of a households 🏠 income was needed to pay 💵 the mortgage, and today only 14.8% of households’ income is needed to pay the mortgage 🤔, again very different today than 2008. So if we look 👀 at all these things to compare 2008 to today, most of the factors that led up to the crash 📉in 2008 just don’t exist today.
One thing that is different ❌ than in 2008 the unemployment rate was 13.2 percent and today we are at 20.6 percent ⬆️so that obviously is having a negative 👎 impact on the economy, but slowly as the pandemic 😷 isolation and social distancing starts to ease up, the hope 🙏 is that people will start to get their jobs back 😁. So, I’m not saying what will or will not happen to the housing 🏠 market, but most of the factors contributing to the 2008 crash are just not present today. ❗️
Hey, I’m not 🚫 giving my opinion, I’m just stating what experts are saying 🗣 and I thought it could be of service to you. 👍
Feel free to reach out to us 📲 at PITBULL REALTY with any questions or concerns, we are always here to help. 🙏
This is your friend 👍 Carltios Zapata from PITBULL REALTY
REAL ESTATE WITH LOYALTY AND LOVE 💓