I’m still working and moving, as the governor has deemed real estate an “essential service.” We aren’t in a mandatory lockdown yet and are still helping people buy and sell homes in today’s market. We’re being as careful and responsible as possible to help keep our clients safe and healthy.
Now, what I want to talk about today is how COVID-19 is affecting the real estate market from an economic perspective.
Right now, we’re seeing similar signs to what we saw in 2008, but make no mistake: This is not 2008. I know a lot of people are scared because they’re losing jobs, people are getting sick, and we can’t even get haircuts right now.
I recently found an article that breaks down why this situation is not the same as what we saw in 2008. I’m going to go through that, explain it, and show you how things truly are.
You can read the full article below, but here are some things that stood out to me.
The first thing to know is that mortgages standards are nothing like they were in 2008. You could get qualified to buy a home very, very easily back then. These days, it’s much more difficult to get a mortgage, and you need to have your finances in place to get approved.
Another thing to note is that prices are not soaring out of control. If we look at the annual home appreciation leading up to the crash in 2008, prices were rising by 8%, 11%, or 12.5% each year. Today, appreciation remains at around 3% to 4% annually, so nothing crazy is happening.
We don’t have a surplus of homes on the market like we did in ‘08 either. On the contrary, we have a shortage. Instead of being a buyer’s market, we’re in a seller’s market. If nothing else came on the market, it would take just 3.1 months for us to run out of inventory versus the eight months it would have taken us in 2008. The percentage of median income needed to purchase a home is about 10% lower than it was in ‘08 as well.
Back in 2008, homeowners were tapped out, but today they’re equity rich. Homeowners can take much more out of their homes and aren’t overextended like they were over a decade ago.
If you’re concerned about making the same mistakes that were prevalent in ‘08, don’t be. There are many more safeguards in place for today’s market than there were back then. People are being careful, specific, and detailed about what they can purchase and how much they can afford in their budget.
If you have questions about anything in this article or related to real estate, let me know. Feel free to reach out if I can help you any way.