A lot of our clients have been asking us lately if we’re in a housing bubble that’s about to burst. Prices are soaring higher and higher, and people want to know if this means we’re headed for a crash.
We don’t have a crystal ball, but we do have some information that tells us that this is a much different market than the one we saw in 2005 before the previous housing market crash.
The No. 1 differentiator between this market and that one is lending practices. Back then, you could get a loan with pretty much any level of income or credit. We are not seeing that in this market. Back in 2010, HUD put some safeguards in place for appraisals, debt-to-income requirements, and more. It’s harder to get a home these days, but that’s a good thing.
We are seeing quite a few low appraisals come in, but we’re also seeing quite a few buyers agree to make up the appraisal gap in cash. These are strong buyers with good loans.
Another common question we hear is, “What’s going to happen when the foreclosure moratorium is lifted?” A lot of homeowners are in forbearance and 13% of FHA loans are in major delinquency. However, because of the appreciation in this market, we believe that a lot of homeowners behind on their mortgages will be able to sell and avoid foreclosure because of the equity they have built up. In our market, we’ve seen price appreciation in the $60,000 to $100,000 range over the last 12 months. If people are behind on their payments and have to sell, most of them will be able to get out from under their house because of that appreciation.
New housing starts are way down over the last decade. Because of this, we have supply issues. Builders just haven’t been building enough homes to keep up with the demand. It’s going to take years to catch up.
The final factor is our out-of-state demand in Houston. We’re working with buyers in California, Virginia, and Maryland right now. I don’t have the exact stats, but we’re seeing about one of five of our listings sold to out-of-town buyers. With so many people working remotely these days, Houston is an attractive option for the job economy. This is pushing up prices much higher here than in some other markets.
These are just a few reasons why I don’t believe we’re headed for another housing market crash. If you have any questions for me about anything we discussed today or anything related to real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.