Is a Real Estate Meltdown Coming?
August 4, 2016 | nella
Every homeowner who owned a home in 2007-2008 has less-than-fond memories of the market crash, when prices bottomed and caused virtually all homeowners to lose massive amounts of value – causing the worst wave of foreclosures to ever hit the U.S.
That crisis was precipitated by, among other things, a wave of rapid price growth that grew the value of homes far beyond what was realistic. This caused a real estate bubble that popped spectacularly and caused a meltdown that lasted for over half a decade.
Now, we’re in a period of rapid price growth that has caused some to think another real estate meltdown is brewing on the horizon. Is that true – or is there nothing to worry about?
For starters, as strong as price growth has been over the past couple of years, it didn’t reach nearly the velocity as it did prior to 2006. In many markets, we’re not even to the peak prices we saw from 2006. And some areas – even in Southwest Florida – have recovered more slowly.
Additionally, we’re still technically in a recovery. Real estate in this area has rebounded nicely, but that’s not the case throughout the nation as a whole. And real estate still has a way to go in Lee and Collier County before we can say that the market is getting overheated.
Experts are predicting a strong end to 2016, marked by higher prices and more sales, but that’s not the same as predicting a meltdown. Those who have predicted real estate disaster in the near future are rightfully afraid of what happened just a few years ago. But, there are key differences between now and then.
One major difference is that buying a house is much more difficult now than it was prior to 2007. Subprime lending, among other things, made buying overpriced homes far too easy for those who couldn’t realistically afford the level of home they were buying. Throw in unethical lending practices, and it’s easy to see how the market got out of control.
That isn’t happening this time around. If anything, the market has actually suffered at the lower levels of the price spectrum because fewer people can qualify for a mortgage or can afford one, meaning there’s a lack of supply at those levels.
We’re probably not headed toward a meltdown, so rest assured that you can buy and sell as normal without fear that the market will collapse around us like it did nine years ago.