submitted by Kathleen Layton, Berkshire Hathaway Home Services/Fox Roach Realtors Newtown Office
You’ve all heard the stories…houses lasting only days, if not hours, on the market. Multiple offers, bidding wars and crazy numbers with waived contingencies. Frustrated buyers writing six, eight, even 10 offers before one is finally accepted. It’s enough to make you wonder if this isn’t 2006 all over again and the real estate market is on the verge of imploding.
According to the experts, that’s highly unlikely. When the market crashed 15 years ago it set off a worldwide recession that few saw coming, and was a result of low interest rates, lax lending standards and values that were increasing at record rates year after year. When the gravy train finally ran off the tracks, more than nine million people lost their homes, values dropped 30% and collectively, homeowners lost $7 trillion. It took more than a decade for most markets to recover and some still aren’t back.
While the frenetic market we’re currently experiencing won’t be able to sustain itself indefinitely, most analysts are expecting a flattening of the curve and a slowing of the pace, rather than a dive off a cliff. A dip, but not a crash. Here’s why…
You can no longer obtain a mortgage by simply fogging a mirror. Lending guidelines are more stringent and transparent.
Unlike what happened to those forced into foreclosure during the Great Recession, pandemic forbearance programs have allowed homeowners to postpone mortgage payments without penalty.
Thanks to stability and growth in the real estate market over the past decade, people have accumulated equity in their homes, which provides a cushion against default should prices decline.
As Lawrence Yun, chief economist at the National Association of Realtors, says, “It’s not a bubble, it’s a lack of inventory.” As the economy continues to reopen and recover, and as we begin to return to “normal,” interest rates will begin to rise somewhat, more homes will come on the market, and the housing market will stabilize.
Until then, hang on to your hats!