Blog Buyer Guess what?? It's not 2008 anymore...

Guess what?? It’s not 2008 anymore…

By Carrie Struss, March 17, 2020

5 Simple Graphs Proving

This Is NOT Like the Last Time

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.

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.5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

2. Prices are not soaring out of control.

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.5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCMThere’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.

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.5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

Keep in mind these are national numbers. In close in Portland specifically we have ONE MONTH of inventory (per RMLS 3/17/20).

4. Houses became too expensive to buy.

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 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

5. People are equity rich, not tapped out.

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:5 Simple Graphs Proving This Is NOT Like the 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 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.

Carrie Struss

Broker Licensed in OR & WA

Carrie Struss has a background in project management, marketing, and photography. Much like in real estate, she simultaneously managed multiple projects and personalities. She is an effective negotiator and stands firm in advocating for her clients. Making the switch to real estate was an easy transition. Carrie utilizes all her unique talents, background, and experiences in real estate. Most importantly, she will connect you to your dreams of not just home ownership, but to what you want your life to be. As your agent Carrie will…
  • help get your home (and emotions) ready to sell, then sell your home.
  • find you a new home complete with (fill in the “must have” blank).
  • facilitate the transaction making sure everyone does what they need to do and has what they need to do it.
  • negotiate tenaciously for you.
  • educate you on the daunting, overwhelming, and at times stressful process.
  • remain calm, always.
  • keep you focused on your goals.
  • pay attention to every detail.
  • show up.
  • effectively communicate in the way that works best for you.
  • uphold Living Room Realty’s values and what they mean to her.
"I care about where you live. I care about you home, your street, your neighborhood, your community. All the things that are important to you will be my priority. I look forward to working with you!"
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  • T: 503-953-0850
  • carrie@livingroomre.com

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