6 Simple Graphics Proving This Nothing Like Last Time | Staten Island Real Estate Update


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Last March, many involved in the housing industry feared that the market would be shattered under the pressure of a former lifelong pandemic. Instead, real estate had one of its best years. Home sales and prices grew a lot over the previous year. 2020 has been so strong that many now fear that the market joy mirrors that of the last housing boom and, therefore, we are now aiming for another crash.

However, there are many reasons that this real estate market is similar to 2008. Here are six pictures to show the dramatic differences.

1. Mortgage rates are nothing like they were then.

During the house bubble, it was hard no get a mortgage. Today it is difficult to qualify. Recently the Municipal Institute published his latest Habitable Credit Index (HCAI) that “measures the percentage of owner-occupied home loans that are likely to be unpaid – that is, unpaid for more than 90 days after their expiration date. A lower HCAI indicates that lenders do not want to tolerate defaults and impose stricter lending standards, which makes lending difficult. A higher HCAI indicates that lenders are willing to tolerate defaults and take more risks, making it easier to get a loan.

The index shows that lenders were comfortable accepting high levels of risk during the 2004-2006 housing boom. It also reveals that today the HCAI is less than 5 percent, which is the lowest since the introduction of the index. The report explains:

“There is significant room left to safely expand the credit union. If the current default risk were to double across all channels, risk would still be in the pre-crisis rate of 12.5 percent from 2001 to 2003 for the entire mortgage market. “

6 Simple Graphics Proving This Nothing Like Last Time |  MyKCMThis is nothing like the last time.

2. Prices do not exceed control.

Below is a graph showing annual home price gratitude over the past four years compared to the four years before the height of the house bladder. Although price appreciation was quite strong pasintjare, it is in no way close to the rise in prices before the crash.6 Simple Graphics Proving This Nothing Like Last Time |  MyKCMThere is a lot of difference between these two periods. Normal appreciation is 3.8%. So, although current appreciation is higher than the historical standard, it is certainly not accelerating without control as in the early 2000s.

This is nothing like the last time.

3. We don’t have an excessive house on the market. We are missing.

The monthly supply of inventory needed to maintain a normal real estate market is about six months. All more than that is overabundance and will causes a devaluation of prices. Anything less than that is a shortcoming and will lead to continued appreciation. As the following graph shows, there were too many homes for sale in 2007, and this caused prices to fall. Missing today inventory, which causes an acceleration in household values.6 Simple Graphics Proving This Nothing Like Last Time |  MyKCMThis is nothing like the last time.

4. New construction does not compensate for the required inventory.

Some may think that new construction fills the void. However, if we compare today just before the house crash, we can see that newly built ones abound homes was a major challenge then, but not now.6 Simple Graphics Proving This Nothing Like Last Time |  MyKCMThis is nothing like the last time.

5. Houses cannot be bought too much.

The purchase formula has three items: the price of the home, the wages earned by the buyer and the mortgage rate available at the time. 15 years ago, prices were high, wages were low, and mortgage rates exceeded 6%. Today prices are still high. Wages, however, have risen, and the mortgage rate is about 3%. This means that the average homeowner pays less than their monthly income to their mortgage payment than then. Here is a diagram showing that difference:6 Simple Graphics Proving This Nothing Like Last Time |  MyKCMLike Mark Fleming, Chief Economist by First American, explains:

“Lower mortgage interest rates and rising incomes correspond to higher house prices, as homebuyers can afford to borrow and buy more. If housing is properly valued, homeowner power equals or exceeds the average sale price of a home. 2006, but today home buying power is almost twice as high as the average selling price nationally. “

This is nothing like the last time.

6. People are equal, not worn out.

During the onset of the house bubble, homeowners used their homes as personal ATMs. Many at once retired their equality after it grew, and they learned their lesson about the process. Prices have risen nicely in recent years, causing more than 50% of homes in the country to have more than 50% equity – and owners haven’t taken advantage of it like last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006 and 2007. Homeowners have raised nearly $ 500 billion less than before:6 Simple Graphics Proving This Nothing Like Last Time |  MyKCMDuring the crash, home values ​​began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owed was greater than the value of their home). Some decided to leave their homes, and this caused a wave of distressed property listings (foreclosures and short sales), which were sold at huge discounts, thus lowering the value of other homes in the region. With the average home equity now standing above $ 190,000, this will not happen today.

This is nothing like the last time.

Bottom Line

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


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