The entire globe is amid the pandemic crisis that has brought businesses to a halt. The real estate and stock market are some of the few sectors which have turned volatile than never before. Real estate firms and agencies providing we buy houses Virginia services are continually being asked if the housing market will witness another crash like the one in 2008.
In 2008, when the housing market crashed, property prices began to fall. Many sellers were in negative equity. Meaning, they had more to pay as a mortgage loan as compared to what they were getting for their property. While a few homeowners put their property at discounted rates on the market, which led to short sales, foreclosures. It also depreciated the values of the properties in that area.
Luckily, looking at the current real estate market today, it would be safe to say that there will no real estate market crash due to COVID-19.
Here are a few reasons why.
- The mortgage standards are different today:
Earlier, getting a mortgage for house buying was not difficult. But it’s not the case today. One has to qualify to get a mortgage. This is a Mortgage Credit Availability Index in place that measures a person’s capacity to apply for mortgage credit. Those with high or good Mortgage Credit Index can get the loan quickly. As compared to the 2008 housing bubble, today, getting a mortgage is difficult, which indicates that the market will not crash.
- Property prices are under control
Although the annual housing appreciation has increased in recent times, it’s nowhere close to rising prices soon before the housing bubble of 2008. Further data show that the current appreciation is not accelerating at a rate where it’s hard to control.
- The housing market has a shortage of properties
In an ideal situation, there should around six months of inventory supply in the market for real estate to sustain. If the market has more inventory surplus, the prices will depreciate. While a shortage of houses in the market will cause appreciation. In 2007, just before the housing market crash, there were too many properties and less we buy houses cash in Virginia like offers, which caused the market to tumble. However, there are fewer properties listed for sale, which is accelerating the home values.
- Houses became too expensive to buy
When determining the affordability of any property, the three things that are considered necessary are the value of the property, the income of the buyer, and the mortgage rate.
Over a decade ago, the prices of the house were high, the average monthly wages were low, and the mortgage credit rates were 6%. Although the property prices today are still high, people’s salaries have increased. Even the mortgage rate has come down to half now.
To put this in perspective, an average family pays less towards the mortgage as compared to before.
- People are equity rich, not tapped out.
Previously, homeowners were cashing out their homes to reap the benefits of equity. They were drawing their investment once it has accumulated, which led to the market crash. In the USA, the prices of homes have increased incredibly. Over fifty percent of the households have collected more than 50% equity. However, the homeowners are not withdrawing their equity like they did between 2005 and 2007.