It’s important to have relevant market information based on facts.
And this goes beyond just your local data. When you think about it, most people are already forming their own opinion of the market because of what they see in the national media.
So, you not only need to know what’s happening in real estate locally and nationally, you need the facts and data to back it up.
Here are the biggest misconceptions about today’s housing market along with the facts.
#1: WE’RE IN A HOUSING BUBBLE
While today’s housing market is anything but normal, it’s not because of the same circumstances surrounding the housing bubble of the early 2000s that caused the crash.
Back then, new construction single-family homes flooded the market, lending standards were incredibly loose, and many homeowners were cashing out their equity left and right.
Today’s market is nearly the exact opposite.
Since the housing crash of 2008:
- Lending standards have tightened
- The market is under-supplied rather than over-supplied on inventory
- Most homeowners are much more cautious with their equity
Plus, housing market experts are forecasting continued price appreciation this year, as demand continues to outweigh home supply.
#2: LOTS OF FORECLOSURES ARE COMING
Stories about the volume of foreclosures are all over the news today. But the most important thing to remember is context is everything.
Yes, many homeowners were able to pause their mortgage payments during the forbearance program, and there was legitimate concern from many experts that it would result in a wave of foreclosures coming to the market.
However, the number of foreclosures we’re seeing today is nothing like the last time.
Here are some of the reasons why that’s happening:
- Most homeowners have enough equity to sell their homes
- There have been fewer foreclosures over the last two years
- The current market can easily absorb the new listings
Today’s data shows that most homeowners are exiting their forbearance plan either fully caught up on payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again.
For all of these reasons, experts don’t anticipate a wave of foreclosures that would negatively affect housing prices.
#3: HOUSING PRICES WILL DEPRECIATE
This might be one you’ve heard a time or twenty.
Skyrocketing price appreciation has many sellers and buyers sitting on the fence. However, experts don’t project home prices to go down anytime soon. Instead, data from earlier in the year has already been adjusted to be higher than previously anticipated.
So, how to answer this question? First American explains it like this:
“While house price growth is expected to moderate from the rapid pace of 2021, strong home buyer demand against a backdrop of historically tight inventory of homes for sale will likely keep appreciation positive in the coming year.”
For both buyers and sellers, this means one thing: playing the waiting game is a risky business.
When it comes to sellers, the higher price appreciation over the last two years has been great for their home’s value. But if they’ll also be buying a home after selling, they shouldn’t wait for prices to fall.
In both cases, waiting will only cost more in the long run because climbing mortgage rates and rising home prices will have an impact on their next home purchase.