Many have been asking what the future of our real estate market looks like this year. Here are my thoughts.
What’s going to happen in our real estate market moving forward in 2020? Are we headed for a crash like back in the late 2000s?
To answer these questions, let’s first take a look at our market’s inventory, or the number of homes available for purchase. Right now, inventory is very low. We have around 1.6 months of inventory, meaning that if no new homes came on the market, we’d sell all of what we have in 1.6 months. A neutral market has around six months of inventory, so that means our market is an extreme seller’s market.
Back in the 2008 crisis, home loans were much, much easier to come by. People could qualify for loans with stated income; essentially, they could simply tell lenders how much they made without any sort of verification. After the crash, lending regulations become much tighter and home loans were no longer as easy to secure, meaning that only qualified borrowers could now get loans. This is a key difference between today’s market and that of the Great Recession.
Also, back during the housing crisis, rental prices were a lot lower than the price of a mortgage. Now, because interest rates have dropped so much and the demand for rentals has increased, the cost of renting is almost on par with mortgages. The days where it was simply cheaper to move into another rental unit are gone now.
The final difference between today’s market and the 2008 crisis is interest rates. Back then, interest rates were two or three points higher than where they are now. Currently, rates are around 3%, which is historically low. That means people today have a lot more buying power than they would have had in the past.
Given all these differences, we expect our current market to hold steady and for home values to continue to appreciate. It’s a great time to both buy and sell a home; there are plenty of buyers in the market with low inventory, and interest rates make homes very affordable.
Hopefully, this information has helped put our current position into perspective. If you have any further questions about the market or buying or selling homes, don’t hesitate to reach out to us.
