Waiting for a Housing Market Crash to Buy?

Blog Post Image
Real Estate

I probably have a dozen buyers who are waiting for a housing market crash before they buy a property. I have no crystal ball and can't predict the future. I have some amount of optimism regarding the housing market continuing it's expansion. Below I've listed some reasons why I believe there won't be a crash like 2008.

1. Increased demand. People from all walks of life are looking to buy a home today. There are people who want to relocate and Florida is a big destination. We have millennials trying to but their first home. Since Covid we have people who've been working at home and are now looking for larger homes. Many are looking at the appreciation in value of their existing home and they want to sell. Most will turn around and buy a bigger home.

2. In the years prior to 2008 people were able to buy homes without much down and sometimes without income verification. Credit was easy and the government was aggressively pushing lenders to make home ownership available to all. Today lending practices are more stringent, buyers have to come up with a bigger down payment. Credit checks and income verifications are tougher. They check your credit when you apply and then recheck it before closing to ensure it hasn't changed. The increased value people have in their homes will see them selling it if they get into financial difficulty rather than walking away from it. 

3. Low inventory. Builders were caught unprepared for the demand in housing. After the 2008 crisis they either went broke or they pared back their operations. The shortage of skilled labor hit the builders hard. The difficulty getting lumber, appliances, roofing materials, drywall. and many other items was a big concern for builders. In addition prices for these materials were rapidly escalating. Crashes normally occur when there is an extreme imbalance between supply and demand. Currently we have the opposite. It would take a major shift in the market to transition from where we are today to a market on the verge of a crash. 

4. Rising Home Prices. Home prices in 2021 are significantly higher than in previous years, yet they haven't reached the height of prices during the 2008 crash. During that period homes were overvalued by almost 60%. Homes in South Florida are currently overvalued by 13%. The continued low interest rate, influx of buyers from up North, and the shortage of homes should keep real estate from experiencing a crash like we had in 2008.