Published April 15, 2021
2008 vs. 2021 Real Estate Market
Will the 2021 Market Crash like the 2008 Real Estate Market?
Pop, Burst, Crash…there have been many different terms used to describe the 2008 Real Estate Market. Personally, I like to refer to it as “The Great Real Estate Recession”. In order to understand the difference between our current market and the 2008 market we need to venture back to the late 1990’s.
Until the late 1990’s our country had hovered around 68% home ownership. At that time, the US government decided that as a nation we needed to raise home ownership to 72-75%. In order to raise the rate of home ownership by 5-7% our financial institutions had to relax the requirements in place to obtain a loan to purchase a home. Fast forward to 2005-2007, we had the highest supply of new construction homes our country has ever seen, as well as a large number of homeowners that defaulted on their mortgages.
Two major points of the 2008 “Great Real Estate Recession”
We had a very large supply of new construction homes available.
We had a very large supply of “distressed houses” available.
Now let’s fast forward to the 2021 Real Estate market. In order to fully understand the 2021 Premium Real Estate market we must first go back to the spring of 2020. In March 2020 our country hit the “pause button” on real estate sales due to the outbreak of the Covid19 Pandemic. During that time manufacturing of materials to build houses also slowed down.
Fast forward to November 2020, and our country saw the mortgage interest rates drop to an all-time low. At this time, many buyers and investors decided to hit the “go button” and the next thing you know, the resale housing inventory becomes historically low. Then, buyers went and bought all the inventory houses and lots in the new construction market.
In conclusion, everything that has a price tag in a free market revolves around Supply and Demand. Our supply is at an all time low, and the current buyers are very financially qualified. 2008 was the result of HIGH supply of both new construction and distressed home sales. Now, in 2021 we have a very LOW supply of both new construction and resale homes. Today’s market is a “Premium Market”, which means in order to buy a house you have to pay a “premium”, otherwise known as, above appraised value.
Does this mean you should WAIT? NO! If you buy a house today for $30,000 above appraisal value your house will meet value within 3-6 months.
Will houses go back to selling for appraised value? YES!
Will we see houses sell for below appraised value anytime soon? NO!!
Remember, since 1900 houses have only sold for below appraised value once, and that was in 2008.
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