3 Reasons this Real Estate Market Will Not Crash Like Last Time

It’s certainly in the back of my mind and I’m sure in many others…will this surging real estate market mirror the crash of 2007-2008? 

Pricing Your Home to SellIt’s no secret that we are in a very hot real estate market. From my small market all the way to major markets like up North in Seattle and throughout the Puget Sound, the demand for homes to buy is at an all time high!

Most analysts will tell you, we are in a nice 5 year growth as markets all across this country are seeing recovery numbers that go back to the house prices we experienced in 2006-2207 before the crash! What this means for all involved is steady price increases for sellers and little to no relief for home buyers either looking for that deal or in most cases, just trying to win a bidding war to simply buy a house!

But still, in the back of everyone’s mind still lingers the worries that we are repeating the patterns of just a decade ago when all this came to a crashing halt…

Are we headed for another real estate crash?

Quick answer, no! Longer answer…there are different circumstances that brought the mighty real estate market to it’s knees some 7 years ago and with that and other ‘safeguards’ in place, this real estate market is poised to experience a much softer landing when things do shift down the road.

1. Responsible Lending Practices

Definitely lack of inventory is a main concern for home buyers today. This is the main fuel on this red hot real estate market right now.

The difference from the last real estate market to this one is lending practices have become much more stringent meaning those who were able to obtain financing in the previous market are simply not a factor in this market. No longer are folks, clearly unable to maintain a financial commitment like home ownership, simply handed a bag full of money as was the case in 2006-2007! 

The increase in easy money and those eager to spend it on housing is well behind us. The irresponsibility of those who created the 2008 crash has led to significant improvements in lending procedures making the mistakes of the past an unlikely player in the next shift.

2. New Construction Homes Are Not Being Built at the Same Pace 

As the increase need for inventory rises, the demand for new homes is a clear sign of a growing market. That said, the number of new home being built is significantly lower now versus what it was a decade earlier.

Although I could throw numbers at you, suffice it to say, new construction is set to only meet the demand and over building is tightly overseen. Speaking with a local building friend, he was telling me that the timeline from the moment he gets a piece of land to the time he is ready to go to market is roughly 3 years. This slower pace is meant to serve as an inventory control system intended to keep the number of homes from exceeding the demand. .

3. Money Costs More

When I first heard a lender friend say this, I thought, “What does that mean?”

Simply put, the federal government is always on the cusp of raising interest rates. Subsequently, keeping the cost of money at a point that not everyone can afford to borrow or get a loan maintains a more steady market and keeps less responsible borrowers from entering the real estate market.

Now, homebuyers are more interested in getting a great rate and being able to afford their piece of the American dream but reality is, not everyone can maintain the costs of owning a home.

My suggestion is to save what you can and keep your eyes on the prize. Getting a home loan without the financial wherewithal to keep oneself above water is not a sound plan to say the least. 

SimonsI am passionate about Real Estate and eager to answer all of your real estate questions! Text or Call me at 360-880-2356 or email me directly to ask about Buying, Selling or Investing in today's Real Estate Market - serving Lewis County & Thurston County, WA.

Janet Simons | Certified Residential Specialist | Real Estate Broker
Mountain Valley Real Estate