With strong inflation numbers, Wall Street volatility, and soaring interest rates, panic and worry is in the air. So many are jumping to the immediate conclusion that as housing slows, values will eventually plunge like they did during the Great Recession. They recall how home values surged from 2000 to 2006, only to plummet after the subprime meltdown in March 2007. Everyone remembers the deep scars from the worst recession since the Great Depression.
Even though so many are anticipating and reporting that a housing crash is imminent, it simply is not going to occur, not now and not in the foreseeable future. Why not? Collectively, homeowners across the country were sitting in a much different position prior to the Great Recession compared to where they stand today. To best understand the differences let us take a closer look and compare the two.
First, the direction of housing has everything to do with supply and demand. Prior to the Great Recession, the inventory climbed to over five times where it stands today. There was a glut of homes on the market. Like today, demand was muted, but was due to the deterioration of lending standards. When low demand was pitted against a glut of available homes, the market lined up heavily in favor of buyers and prices sank. Back then there were low or no down payments, fraudulent lending practices, and loose lending standards and programs, allowing anyone to get a loan and purchase a home.
Today, pulling cash out has been plunging as rates have climbed. There is plenty of tappable equity and there are far more homeowners who own their homes free and clear. Looking at now versus then side by side it is easy to understand why the two time periods are completely different. Since the Great Recession, home buyers have been stronger. With the vast majority of homes sold over the last couple of years procuring multiple offers, Darwinism has taken place, survival of the fittest. Only the strongest buyers have been winning: strong credit, money in the bank, good jobs.
Even if housing were to slip into a Slight Buyer’s Market, it would have to be at those levels for months before prices start to decline. And any declines would be small. There is a real stickiness to home values. Very few sellers really “have to” sell. Homeowners are in a very strong position with plenty of equity, low mortgage rates, high credit scores, good jobs, and money in the bank. There will be no reason to panic. Values will not plunge.
When assisting buyers in finding the right home, it takes more than just waiting for a property to hit the market. I will work every angle possible even if it means uncovering homes that are not on the market. Often times a potential homeowner isn’t in the mindset to sell but will if the opportunity presents itself. A strategy that has provided a successful outcome more than once for me is to identify the homes that match my clients' criteria and mail a sincere letter to all of those homeowners. Last week I did just that - I mailed 102 letters to homeowners in Coto de Caza who own a single-level home informing them of my clients' serious interest. Less than one week later, we received an email from a homeowner who was not in the market to sell but my letter prompted his interest. Next step, we make arrangements to view the property even though it’s not on the market. I take my clients' goals as if they were my own and work hard to make them a reality.
Heard about the Proposition 19 property tax break? Wondering who qualifies? Curious to see the tax break in action?
Visit prop19taxbreak.com to get up-to-date information on this potential property tax break. Here are some examples of how the tax break actually works:
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