Why You Shouldn’t Expect a Market Crash

People always ask us if they should wait for prices to drop, like it’s a given that prices will eventually decrease. They might even ask us when the bubble is going to burst. Today we wanted to address these questions and talk about what's different today from back in 2007. We saw a big market crash in 2007 through 2010, but we have to remember that real estate didn’t cause that crash; the financial market did. Lenders were letting people borrow up to 125% of their home value. Suddenly, the economy took a turn, and all of these people had houses they had overborrowed against. They had bought boats and RVs with that money, and now they were in trouble. The crash was triggered by the loose lending practices, and it took us a long time to recover. Today we have a whole different issue. It is still hard to get a loan; you can only take 80% of your money out if you refinance, for example. Houses are collateralized, and people have enough equity in their homes to make a profit even if prices fall.

"Real estate didn’t cause the crash; the financial market did."

What does this have to do with you today? We’ve seen a bit of relief in the market these past months, but we have had less than two months of inventory for over five years. Right now, we’re sitting at two weeks of inventory, and there’s simply no sign of things going wrong. The financial market seems strong. Interest rates might climb a bit, but 4% is still a great rate. There is nothing to suggest that home prices would fall, and if they do, we would have bigger issues. Real estate drives every other market, so falling prices would have a huge impact on our economy. If you have any questions about this or another real estate topic, feel free to call or email us. We would love to help.