With this extreme sellers' market and rising real estate prices, sometimes people speculate or question, are we headed towards another real estate market crash as in 2008? Looking at the market fundamentals, the informed and short answer to that question is NO. In brief, here are the reasons why the market conditions are much different now than in 2008.
- The real estate market prior to 2008 was essentially fueled by no lending restrictions (liar loans).
- This was economically unsustainable as we saw unit sales (or demand) peak in April of '05, with a steep decline for the next two years.
- The stunner is that we saw average prices continue to rise for over 2 years even as unit sales plummeted. Demand was very weak. This is the insanity that pretty much everyone missed and goes to a major take-away - price is a lagging indicator.
- Today's market continues to support a healthy amount of unit sales. Active and sold listing numbers remain relatively consistent. Demand is strong.
While no one can predict the future, all indicators are that the real estate market is steady and stable. There could be major events that would influence the market. Rising interest rates may dampen housing purchases. A war or an extreme stock market crash could also sway the real estate market. Not withstanding such a major event, it is thought that eventually we will see a softening of the market after some time - more balance between sellers and buyers - however gradual and marginal. Market conditions do always change, but there is nothing in the current fundamentals to suggest a big change or crash.
Little Daisy Sold!
