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housing-market-2020-realtor-rau

US HOUSING MARKET UPDATE | 5 Simple Graphs Proving This Is NOT Like the Last Time

By

Tynna Rau

Posted in Buying, Homeowners, Market Trends, Selling On March 20, 2020

With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. 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.”

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

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

housing-market-2020-realtor-rau

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which 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 even more difficult than it was before the bubble.

2. Prices are not soaring out of control.

housing-market-2020-realtor-rau

Below is a graph showing annual 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.

3. We don’t have a surplus of homes on the market. We have a shortage.

housing-market-2020-realtor-rau

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.

4. Houses became too expensive to buy.

housing-market-2020-realtor-rau

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:

5. People are equity rich, not tapped out.

housing-market-2020-realtor-rau

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.

Bottom Line

If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

Source: www.keepingcurrentmatters.com

 buysell, covid19, homebyrau, housing, housingcrisis, notarecession, realestateagent, realestatetips, realtorrau, realtortips, realty, recession, ushousing, ushousingmarket

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eXp Realty is the first cloud-based real estate brokerage, the largest residential real estate brokerage by geography in North America and the first and only real estate brokerage to operate as one company-owned brokerage in all 50 U.S. states. It is one of the fastest growing real estate brokerage firms in North America with more than 15,000 agents across 50 U.S. states, the District of Columbia and three Canadian provinces. As a publicly traded company, eXp World Holdings uniquely offers real estate professionals within its ranks opportunities to earn company stock for production and contributions to overall company growth.

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Tynna Rau | Florida Realtor®
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I’ve been working with this buyer since May of l I’ve been working with this buyer since May of last year and now I’m super excited to say that they are finally under contract with this beautiful new construction home in Haines City! Congratulations Shannen, Justin and family! I can’t wait to see your happy faces once you finally close on this house! 📄 🖊️ 🤗 

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🚨 JUST LISTED 🚨 Durant Homes Assisted Livin 🚨 JUST LISTED 🚨

Durant Homes Assisted Living Facility

6929 Durant Rd,
Plant City, FL 33567

$850,000.00

13 Bed
3.5 Bath
3,487 sqft
This property is being sold with the business including the patients, employees and all the furniture, as well as the mobile home on the back of the property.

Great commercial investment opportunity! This assisted living facility sits on a little piece of paradise near the end of a small country road. It’s private, quiet and shady. This facility is licensed for 20 patients and currently has 18. 7 of the bedrooms are shared between 2 patients and 6 bedrooms are used for single patients. 🛏️ 

Updates performed in the last year include:
- The roof
- The windows in the bedrooms
- 2 of the bathrooms tub and shower combos
- The front porch exposed decking

The 3 bedroom, 2 bath mobile home in the back of the property was added last year and is used to house onsite employees. Around the property you will find various planted fruits and vegetables including avocado, mango, guava, jackfruit, atis, ube, banana, and sweet potato. Don't miss out on this incredible commercial investment opportunity - call today to schedule a private tour today! 👩🏽‍💼

Ma. Cristina “Tynna” Rau
EXP Icon Agent & Certified Mentor
EXP Realty | The Alliance Group
(407) 900-7902
tynna.rau@exprealty.com
homesbyrau .com

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Congratulations to my friend Diana for closing on Congratulations to my friend Diana for closing on this house on her birthday! We got 25k off asking price, and all the repairs requested were covered by the seller! 🍾🥂

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That feeling when when you finally closed on your That feeling when when you finally closed on your home! 🍾🥂😂

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Another new construction home under contract! It’s important to have your own representation even when buying new construction, because besides having your best interest at heart, who else is going to get you $11k towards design options and $14k to buy down rates? This beautiful home will be ready for the family in July of next summer! 📑🖊️🏡

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Feeling grateful to help another Filipino family g Feeling grateful to help another Filipino family get their dream home in Gainesville! This family moved to the US in 2021 and they’re already official homeowners before they even became US citizens. Hard work pays off when you delay gratification! They went under contract on this new construction home at the beginning of the year and they closed on it last week with $40k in equity! Congratulations to the new homeowners! 🍾🏠💵

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