How can we compare this to what happened in the Real Estate market in 2008-2009?
In 2008 and 2009 the financial world was coming to an end! Large institutions and small companies were going bankrupt along with a ton of individuals. It was a very scary time filled with uncertainty and fear. But, we got through it!
The Southbay saw our local real estate market shoot past the highs of 2007 as well as witnessing the stock market recover. Interest rates never really seemed to climb and in the last few years, it’s been quite the opposite, we have seen them consistently going down and most recently, lower than they have ever been.
PSA: Refinance if you haven’t already in the last 3 months.
What came out of that last downturn?
(These are things to remember that will help during this time and serve as reminder that good things/life lessons can come out of situations like this)
- Mortgage Debt
It’s ridiculously low across the country. Since 2009, the home loans are some of the most quality and least risky loans the banks have made in modern times. Over 50% of the country has 50% LTV (loan to value) or less on their homes. The facts show we are not going to have a flood of foreclosures like we had. If anything, the last 3 recessions before 2008/9 home values actually went up during that time.
- Interest Rates
Like I mentioned in the intro, interest rates are at a historic low and we don’t have that fear of short-term rates “unlocking” and borrowers rates going up combined with the fact that they have no equity in their home. It’s not like that this time around. The fact is, on a mortage basis of payment vs. paycheck, that ratio is low as it’s been in a really long time at 14%. Historically, Americans would use 21% of their paycheck towards their loan payment.
- Government Help
Wherever the front lines are, we all know the government will ultimately do some sort of bailout. I am not saying people won’t be affected, and I am not saying everyone will be saved, but what I am saying is that the government will do something to try and help the masses.
What we have learned is, too much debt is bad, financial diversification is good, and hard work pays off. We came out of 2009 stronger, leaner and meaner. This is a different attack on us this time, but the principles are similar. We need to be smart, keep calm, and things will ultimately work out. A lot have people have been waiting for there to be a correction since 2009 and everything is cyclical, we just didn’t know how it was going to show up.
Well now it’s here and it’s time to deal with it. We are all in this together!!
The real estate market will continue to move and there will be some deals to be had, don’t let fear control your decision making. If you are looking to buy or sell, there is always a reason to do one or both.