Should you wait to buy a home?
Have you considered buying a home in the East Bay and thought to yourself, “I think I'll just wait until the market prices come down” or maybe you thought, “hmm, I'm going to wait until all those foreclosures hit the market, and then I'm going to scoop up a deal. Worked last time.”
Everyone still has PTSD from the last housing bubble crash. Let’s talk about six reasons why we won't see the housing bubble burst in today's market.
1. Mortgages are much tougher to get. It's just not the same as it was in 2008, when it was easier to not get a mortgage than it was to get a mortgage.
2. Price appreciation. Recently, it was anywhere between 8 - 13% appreciation per year every year in the four years leading up to the housing bubble. Normal appreciation is 3.8%, so this is a huge difference. Now in today's market, we're seeing anywhere from 0 - 8% appreciation per year for the four years leading up to today.
3. Demand continues to outpace supply, and it doesn't seem to be slowing at all. This can be measured in the months of supply of inventory that we're seeing. The four years leading up to the housing crisis, we saw the months of inventory increase every single year, 4 months, 5 months, 6 months and then 10 months of inventory leading up to the housing bubble burst. Now in today’s market, it's actually just the opposite. We’ve had 4 months, 3.7 months, 3 months, and most recently, we're down to 2.1 months of inventory.
4. New construction “starts” hit a high every year in the 4 years leading up to the housing bubble. That's just not the case now. We've actually had 13 straight years of ‘below the 50 year average’ in new home starts.
5. Low interest rates and increased wages have kept affordability relatively high. Did you know that a home buyer actually only needs to use 14.9% of his/her income to qualify for a home mortgage now? Back in 2006, this number was over 25% of his/her income to qualify. Big difference!
6. And probably the biggest reason we won’t see a bubble burst is that people are no longer using their homes as ATM machines to finance their lifestyles using long-term gain assumptions that just never came true.
The bottom line is that we are absolutely not in the same situation we were in before the housing crisis. If you're looking to buy a home and you want some facts and numbers, just reach out below.