Again, lots of talk about the recession.
The Yield curve has inverted, if you’re not sure what that is, look it up, but over the last 50 years when the yield curve inverts it is one of the most consistent recession indicators. That coupled with the stock market dropping 800 points in August and bouncing up and down since, has caused a lot of talk about a recession being closer than we thought.
So, what does that mean for the U.S. Housing market?
Interestingly enough homeowners in the U.S. have over 6.3 Billion dollars in equity in their homes. Only 4.1% of homeowners have negative equity. Back in 2010 homeowners had 25.3% negative equity.
So, as we think about a recession and how it relates to the housing market, we need to look at factors like this. With 6.3 billion dollars of equity in homes, homeowners aren’t going to bail out. Also, according to the Urban Institute over 37% of homes don’t even have a mortgage on them. During the last crash, people were taking equity out of their homes and buying boats and cars. They were using their homes as an ATM machine.
Now, they are keeping their money in their homes that’s why 37% of homes are mortgage free and we have 6.3 billion in equity. Let’s see what CoreLogic thinks, they break down their anticipated increase in appreciation. If you look at this graph, ALL states with the exception of Texas are seeing an increase in appreciation.
According to the Home Price Expectations Survey, all the analysts are saying that we are going to see appreciation between the next two and four years depending on how far each organization makes their predictions. The reason I feel it’s important to talk about this is because with all the hype of a Recession, we need to truly know what that means about the housing market and not let the fear of what happened in the last recession control our thoughts and emotions about what we should or shouldn’t do.
As Ali Wolf the Director of Economic Research says “As people having PTSD from the last time, they’re still afraid of buying at the wrong time.” But we need to know the differences between 2008 and now. As Jeff Tucker, Zillow Economist states “The housing crash during the Great Recession left a lasting impression… But as we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than an abundant home, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages.
The housing market is simply much less risky than it was 15 years ago.”
Bottom line is that we are in a totally different time and many of the economic indicators as well as how easy it was to get a loan and the types of loans that were available back then, are totally different. So, let’s not make this something that it isn’t.
I just feel it’s important we know the facts, as many times the media is NOT telling us everything and they love to get those negative headlines out there because they sell more!! Please reach out to me as I want to help be your knowledge base.
Questions? #CallCristobal now!