Josh and Jess recently attended the Eastern Panhandle Board of REALTORS (EPBR) Real Estate & Economic Outlook forum.
During the Q&A, Jess asked Dr. Lawrence Yun, a PhD Economist who studies the housing market (and personal hero of Josh's), what he would say if a friend of his asked him if the housing market was going to crash in the near future.
Dr. Yun acknowledged that this was a good question, especially from someone who remembers the price drops in 2008 through 2010. But, he pointed out that this is not the same situation that we had in 2008, for two key reasons.
One is simple supply and demand. There is demand for houses, and the houses aren't there. You may have wondered if builders are overbuilding--and the answer is no. Take a look at this:
Builders aren't overbuilding--they're attempting to correct 15 years of underbuilding! So while households in the US continued to grow, new housing starts haven't kept up.
Secondly, there's the issue of lending standards and homeowner equity. In 2005, many people got loans who really couldn't afford them. Predictably, they started missing payments, and their homes went into foreclosure--which flooded the market with distressed property that sold for less than it would have otherwise.
But today, not only are lending standards higher, but homeowners have more equity than ever. That means they are unlikely to lose their home to foreclosure--instead, they would simply sell their home for the market rate, and "trade down" to something they could afford.
All this leads to our conclusion: we're not looking at falling prices, but rising prices. And that's also the general consensus of experts that watch the market, as shown in this graph. There's only one group that is predicting falling prices in the next 12 months, and that prediction is less than one half of one percent. If you average out all these predictions, you get 3.1% price growth--which is what I would call a healthy market.
Thinking about buying or selling and want to know about your local market? Shoot us a message. We're happy to chat any time!
