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Crash or Boom?

By 28 August, 2018 No Comments

A high number of investors and homebuyers continue to be concerned about a housing bubble and ultimately a housing market crash in 2018 or 2019. Back in 2007, house prices were hitting records while the economy was booming and then the crash came so quick, so suddenly, catching everyone off guard. Isn’t that when it usually happens? When you least expect it.

Don’t we learn from history?”  I think what history can tell us is that a crash is eventually coming, however it can’t really say when or how it will happen.

This recent chart from Case Shiller shows the volcano like like shape of the last collapse. What’s different about this new rise is the unsteady, less steep climb, upward.  Those halting steps could show the fear of investors and homeowners and how panic might be a bigger factor this time around.

Crash warnings have been sounding for several years, which means the pressure for a big crash has been building.  Subprime mortgage default started it last time, but something else will likely start the avalanche for the next one. 

Southern California home sales hit the brakes in June, falling to the lowest reading for the month in four years. Sales of both new and existing houses and condominiums dropped 11.8 percent year over year, as prices shot up to a record high, according to CoreLogic. The statistics covers Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties.

The weakness was especially apparent in sales of newly built homes, which were 47 percent below the June average. Part of that is that builders are putting up fewer homes, so there is simply less to sell.

“Affordability and inventory constraints are likely the main culprits in last month’s sales slowdown, which applied to all six of the region’s counties and across most of the major price categories.” Andrew LePage, CoreLogic Analyst.

Fewer affordable homes

Sales below $500,000 dropped 21 percent on a year-over-year basis, while deals of $500,000 or more fell about 3 percent, marking the first annual decline for that price category in nearly two years.

The rise in mortgage rates over the past six months, increases a borrower’s monthly payment. Rates haven’t moved much in the past month, but are suddenly going higher again this week, pointing to even further weakness in affordability.

So is a crash happening soon? No one knows for certain the timing, all we can do is plan and take the necessary measures to reduce the negative affects of a coming correction. You may want to consider downsizing; many people bought their homes after the previous correction and are sitting on some significant equity. Consider selling and moving into a less expensive property, you may even be able to live mortgage free with cash in the bank!

Not a bad place to be.

Who’s Your Agent?

I recently had the privilege of spending the day with the #exceleratecapital team. They interviewed me on who I am, what I’m all about, how long have I been in real estate and why is my X-factor among the thousands of other agents. 

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