Lets Look At The Current Market Versus the Market in 2008

Are We Looking To Repeat the 2008 Real Estate Crash?

June Housing Indicators

The Monthly Housing Indicators for Georgia are in for June. Median Sales Prices were up 20 percent year-over-year, Days on the Market decreased 22 percent, and Months Supply of Inventory rose 29 percent.

• New Listings increased eight percent to 20,898
• Pending Sales decreased 17 percent to 12,935
• Closed Sales were down 13 percent to 14,485
• Inventory levels increased 24 percent to 24,673 units
• The Median Sales Price increased 20 percent to $360,000
• The Average Sales Price increased 17 percent to $425,032
• Days on Market decreased eight percent to 22 days
• Months Supply of Inventory was up 29 percent to 1.8 months

Inventory levels in 2008 vs Now:

It has always been said that a balanced market has about 6 months of inventory. In 2008 there was 15 months of inventory. Today we have around 2 months, well below the balanced market of 6 months. Despite a recent increase in inventory , we still have a large shortage of available homes on the market. There are a number of factors that contribute toward this, however we do not anticipate this shortage disappearing anytime soon. With not enough homes for buyers, the upward pressure on price will continue. The increase in interest rates has priced a number of buyers out of the market, however, it hasn’t priced all buyers out of the market.

Underlying financing in 2008 vs Now:

ARMS, 100% financing, NINJA loans. In 2008 approximately 25% of homes with mortgages, were financed with loans that were destined to fail. Teaser loans with low introductory rates were resetting to much higher rates and squeezing homeowner’s pocketbooks. Verification of employment and income was not considered as everyone was drunk on the thought that real estate would always go up in value.

Home Equity in 2008 vs Now:

The difference between what a homeowner owed, and the homes value was at an all time LOW in 2008. The result of that was once a homeowner found themselves no longer being able to afford the home, they were under water and had to either walk away, file bankruptcy, sell as a short sale, or loose the property in foreclosure. Because of the 35% home value appreciation we have observed in our area in the past 2 years, the equity in which homeowners hold is at an all time high!. If that same homeowner from 2008 were to get into financial trouble and need to sell today, they have plenty of equity and could afford to simply place it on the open market and sell it!

Loan Modifications did not exist in 2008.

Homeowners that found themselves in financial trouble early in the great recession had very few option to save their home. Loan modification programs came only after a few years into the recession, and were very confusing and many banks had a difficult time understanding them and processing in a timely manner. Today, loan modifications are common during times of need. We have seen this played out recently during the Covid pandemic. Cooperation between government and private business instituted a forbearance program allowing homeowners (and renters) to stay in their homes with the ability to modify their existing loans later down the road. This program has saved countless homeowners from loosing their homes in foreclosure. In fact, the national average of homes that enter foreclosure is 1%. In 2008 it reached 15%. Today, we are less than 0.6%. There appears to be NO foreclosure waive, which would flood the market with inventory in the near future.

Are You Still Waiting For A Crash?

Realtors, Appraisers, and Lenders do not set the price of real estate… Buyers do and there are still more buyers then homes available.

Look at the market as a three legged stool. Yes, one leg (interest rates/borrowing power) has ben damaged, but we still have two very strong legs.

Leg #1 – SUPPLY of Inventory. The supply of inventory is low creating scarcity. With not as much product, buyers still need to compete for a home.

Leg #2 – DEMAND for homes. In our area employment is strong, personal incomes are increasing, and population growth is strong. With this comes demand for homes which places upward pressure in prices.

Leg #3 – INTEREST RATES . This is the only leg that has adversely effected the market. Its more expensive to borrow, which has lowered borrowers buying power.

There is no crystal ball to tell us exactly what will happen, however based on the above and our continued study of the market we do NOT see any type of a crash occurring. As the market becomes more balanced we see an opportunity for buyers and sellers to finally jump into a market in which they had exited. This is a great thing for the market as a whole!!

Are you, or someone you know, interested in buying or selling Real Estate?  If so, send us your contact information and we will reach out to you and answer any questions you may have. contact us now!

– Townsend Realty Group