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Why You Shouldn’t Worry About a Crash

Friday, April 1, 2022   /   by Brittany Aspenson

Why You Shouldn’t Worry About a Crash


Here’s why we likely aren’t heading for a crash anytime soon.

Our market has been hot for a long time, causing many people to wonder if another market crash is just around the corner. Fortunately, our market is nothing like it was back in 2008, and today I want to talk about why. 

 

The first reason why our market isn’t like 2008 is that housing remains affordable. Three key factors determine affordability in a market: interest rates, wages, and home values. When we compare the two markets, our home values are high, just like in 2008. However, interest rates are lower than in 2008, and wages have increased over the last few years. Because of this, houses are still relatively affordable even though values keep increasing. 


"We’re currently in a great lending environment."


Another difference between this market and 2008 is our mortgage standards. Lenders tightened their standards after the crash, and things haven’t changed since then. You can no longer put 0% down, and most offers are either pay in cash or put 20% down. We’re in a good lending environment that just wasn't present in 2008. 

 

Another factor is that our market doesn't have the wave of foreclosures it did in 2008. They may increase slightly since forbearance has ended, but the impact will be negligible. Plus, most homeowners have tons of equity, so even if they couldn’t make their payments, they would be fine. 

 

The final and most important reason why we aren’t heading for a crash is our incredibly low inventory. In 2008, we had around 25,000 active listings in the Twin Cities market. Now, we have less than 5,000. According to Greg McBride, the chief financial analyst at Bankrate, “Low inventory begets low inventory. It’s really hard to get more inventory when we’re in a market like ours. Since labor and building costs are rising, new construction homes are difficult to build, so it looks like our market isn’t heading anywhere. 

 

If you are looking to buy a home, don’t wait for a crash; one isn’t coming. Both my daughters bought their first homes last fall, and if they waited until now to purchase, they would be paying an extra $400 per month because of increasing interest rates. Don’t wait; buy now and take advantage of increasing home values. 

If you are interested in buying or selling, I have a personalized home-move plan because everyone’s situation is different. Just call or email me; I look forward to hearing from you!


  home selling, buyer's, seller's, sellers market, homeowners

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