The American Housing Market Resembles 2006

By Steve
October 3, 2023
3 min read

The American Housing Market Is Resembling 2006. Is It Deja Vu All Over Again?

The American Housing MarketThe American housing market is sound disturbingly familiar to us who survived the housing crash 15 years ago. Skyrocketing home prices have very suddenly leveled off. Recession fears are swirling and the number of home sales has dropped off in the past year. Is it 2006? Remember, the year that saw the ramp-up to America’s housing crash two years later? For some of us, it seems like Deja Vu all over again.

Experts are adamant that the correction in the housing market is coming and it is simply a correction and not a catastrophe. It appears news reports from early 2006 could be written about what’s happening today.

However, in 2006, the pundits were wrong. We all know that a housing bubble burst. This then ushered in the Great Recession and the global economy took a hit with it. 

So Is The American Housing Market In For A Repeat Performance? 

the american housing marketHousing experts are quick to point out that the foundation of today’s housing market is stronger than the mid-2000s. This time the downturn is due to higher mortgage interest rates. The fed raised rates to curb inflation.

Today’s buyers have monthly mortgage payments that are basically double what they were prior to COVID-19. As a result, homebuyers aren’t buying or can’t bid on homes.

But the most important difference between then and now is there are many more buyers than there are homes available this time around. The acute housing shortage will likely keep prices from falling off a cliff.

During the Great Recession, there were plenty of available homes. Hoewever, there was no one to purchase them. As a result, prices dropped about 26% over a five year period. Today, buyers are still willing to bid over the asking price despite the financial challenges they face.

In addition, mortgages made over the past few years are much safer than those made nearly 20 years ago. Federal regulations since 2009 have eradicated the worst of the subprime mortgages that got homeowners in trouble in the mid-2000s. Borrowers have been thoroughly vetted. So, that only the strongest have been approved. Today’s homeowners are also sitting on record amounts of equity.

Will The Market Crash?

The American Housing MarketThe question on the minds of homebuyers, sellers, and homeowners is what is going to happen with home prices.

They’ve already come down from their peaks last summer. However, this is typical. 

Even with the affordability challenges, more than half of the sellers in the mid-Atlantic region received multiple offers in March. About a third of all of the home sales went for more than the list price.

Real estate experts also say home prices could continue to rise in the Midwest. Homes in the lower price tier markets could also see prices go up. That’s because demand is so high for those more affordable properties that the competition often results in higher prices.

The shortage of homes for sale is also keeping prices high. Builders have slowed down construction as their pool of buyers has dried up. And homeowners who would have listed their homes have been reluctant to do so thanks to the high mortgage rates. Most sellers are also buyers, many of whom will need to get a new mortgage at today’s rates. That means significantly higher monthly payments.

This Article Originally Appeared On MFI-Miami

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