Could there be a real estate market crash? The so-called financial experts have predicted this since 2008, since the last financial crisis. Are we in a housing bubble? And what should you do as it pertains to purchasing a home if you’ve been on the fence?
Here are some things to be aware of as it relates to the market: Let’s rewind the clock to the 2008 financial crisis. It was brought on by the subprime mortgage meltdown which was orchestrated by the federal government and Wall Street. That was an economic calamity that was bound to fail from the get-go. Losing your underwriting standards, stated income loans often dubbed as liar loans, no ratio loans, ninja loans, no income, no asset loans, all contributed to the financial collapse. Let’s fast forward to today, housing prices are on the rise, jobs are prevalent, job growth is up, and unemployment is down. Most people right now are feeling optimistic about their jobs and as a result, we have an exuberant real estate economy for the most part across the broader United States.
Getting a mortgage these days is not the most pleasant or fun thing in the world to do. Supplying all documentation and proving the federal requirement called ability to repay a safeguard. This is to make sure that the loan you’re applying for is one that you can afford. All these elements point to at least a stable real estate economy. So, what could cause there to be an actual market crash where a housing price is plummeting, perhaps a stock market crash, or a Tech sector crash? Generally, the government is not stupid, and they’ve learned from their previous mistakes as a result. If there is movement in one area, there’ll be moving in another to offset it.
For example, God forbid, if there is another 9/11, that would tank the financial markets. Particularly the stock market would be an oak market an indigenous reaction and probably for weeks and months after and then mortgage rates would more than likely radically go down as that would be bad news for the economy. If there is a crash, what happens is that 90% of the time mortgage interest rates get better. This makes housing affordability more desirable from payment and budgetary perspective. There is a perspective that there’s always the Yin and the Yang. Could there be another market crash down the line? Absolutely. Is it realistic to think it’s going to happen anytime soon? Probably not. So long as the federal ability to repay a requirement from the mortgage standards is still there, eureka! If the overall job market remains stable, those elements point to a stable economy going forward. Additionally, we also have another broad problem which is supplying the demand. More people presently want to buy a house than there are enough houses available for sale. It’s speculative that when the pandemic ends and the mortgage for appearances that took place during the pandemic will produce a new supply of homes on the market. But that is yet to be seen. We are already seeing some ease in the market with the ease of getting into a contract in most markets. So, if you’re on the fence about purchasing a home, let the payment be your guide. The payment is what drives affordability, it drives the budget, and it should be the driver of all decision-making for you and your family.
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