That is the question of the hour as home prices continue to rise across the country and buyers are forced to engage in bidding wars to land a contract. Based on our experiences back in 2008 and 2009, it is no surprise that many are nervous about the meteoric price increases we’ve witnessed over the last year. We simply can’t afford economically or emotionally, for the housing market to collapse igniting another Great Recession.
Luckily, 2021 is a whole different ball game. The key difference is two-fold: 1) Lending guidelines were incredibly lax back in the years leading up to the crash. With stated income loans basically anyone with a pulse could get a home loan. 2) There were plenty of homes on the market to meet demand. Today’s market simply reflects the fact that prices rise when demand outpaces supply and demand continues to be fueled by near record low interest rates and a Pandemic driven desire for larger living spaces.
Realistically of course, price increases can’t continue forever, and we may be starting to see a bit of a market slow down. Just in the last two weeks, I’ve had several buyers indicate that they have no stomach for getting into a fierce competition just to buy a home and have chosen to wait it out until some sanity returns to the real estate market. Here in San Diego, I predict that over the next two years prices are likely to continue to rise, but not at the crazy rate we’ve seen in the past year. Mortgage rates are the wild card. If rates were to rise dramatically, we would soon see a reduction in housing prices. That however is an unlikely scenario. But as the economic impact of the pandemic lessens and more people return to work in offices, it is anticipated that the desire or need to move to a larger home will relax and demand will soften which could mean fewer bidding wars and offers over asking price.
Another factor that will help keep the housing market intact is that unlike the late 2000s, most people have equity in their homes. So even if a homeowner was hit hard by the Pandemic there was the option of a forbearance agreement, or if they can’t afford payments, it is likely they can sell and even walk away with money avoiding a foreclosure or short sale.
So in a nutshell, no need to panic. From a seller’s perspective, this market is still red hot and it is a great time to sell, especially if you plan to move to a less expensive community. Not looking to sell? This might be a good time to refinance or get a HELOC and put some of your growing equity to use on something fun!
Please let me know if you have any questions, and as always, your referrals are greatly appreciated.
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