5 Simple Graphs Proving This Is NOT Like the Last Time: Part I

There are many reasons why this real estate market is nothing like what it was in 2008.
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With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), we have heard concerns we may be headed for another housing crash like the one we experienced from 2006–2008. That feeling is understandable, but we’re here to tell you that should be the least of your worries. 

Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

It’s tempting to try and time your home buying decision based on current events. However, such an important financial decision should always be based more in your personal household finances than in the day-to-day activities of the stock market. If your household finances look strong, now could still be a very good time to buy a home.

There are many reasons why this real estate market is nothing like what it was in 2008. We’re going to break out those reasons for you over three posts. Here is the first post in the series covering five visuals that prove our market is not gearing up for a housing bubble like we saw in the 2000s.

This post is part of a three-post series. UPDATE: Read Part II here. Read Part III here.

Reason 1: Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Real estate was heavily impacted in 2008 due to oversupply of homes for sale, paired with loose lending standards. People took out large mortgages on expensive homes and used an array of loan products to keep their payments low. This eventually led to many households having little to no equity in their home. 

Today, it is tougher to qualify for mortgages that may be out of your reach. The Consumer Financial Protection Bureau has required greater transparency in loan estimates and the reach of certain loan products has been severely limited. Because of this, home buyers can now be more confident that the mortgage debt they take on is manageable for their budget.

The Mortgage Bankers’ Association releases a monthly Mortgage Credit Availability Index. This index is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is noticeably more difficult—and nowhere near what it was before the bubble!

Reason 2: Prices are not soaring out of control.

If you’ve been paying attention to home prices in Western North Carolina, you may feel like they have grown significantly over the last few years. Indeed, according to our last Quarterly Market Report, if you bought a house in 2010 for $250,000, today it would be worth $346,862. However, while this growth may seem out of control, it’s actually very stable.

Below is a graph showing annual national house appreciation over the past six years compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.

There’s a stark difference between these two periods of time. Normal appreciation is 3.6%. So, while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

We have More Proof

Do the graphs above help alleviate some of your concerns about the state of real estate during the Coronavirus crisis? Hopefully you can see we’re not making the same mistakes that led to the housing crash of 2006–2008. 

If you’re still concerned, tune back in to the Beverly-Hanks blog next week for Parts II and III of our blog post series.

UPDATE: Read Part II here. Read Part III here.

All real estate is local. In order to make confident real estate decisions, it’s important to have timely and neighborhood-specific information. Contact us today to speak with a Beverly-Hanks real estate agent about buying homes and land in Western North Carolina. View all Beverly-Hanks real estate listings.

This post series adapted from SimplifyingTheMarket.com.

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