Has the Housing Market Recovered?
I'm asked this question all the time..."Have we recovered from the housing bubble crisis?" I'm also regularly asked, "Is it going to happen again?" Here are my thoughts.
In case you were living under a rock a decade ago, the housing bubble crisis people are asking about occurred in 2007. For a period of years prior to that many factors were unnaturally inflating housing prices. In the most simple terms, some of those factors were unscrupulous lending practices and too much speculation in some markets including Florida. People were getting mortgages they could not afford. When the FED raised rates, the adjustable mortgage rates skyrocketed causing many borrowers to default and home prices to drop drastically. This lead to a banking crisis and recession. (This is a very over simplified explanation.)
So, have we recovered? I suggest you take a look at this price chart from our local MLS. It shows median home prices for the last 10 years. In 2009 the recovery had already started. There was a bit of a dip at the end of 2010, but since then you can see we have had steady increases in the median home price in this area. We may not be back at the unnaturally overinflated prices prior to the crash, but we are doing just fine. If you purchased a home 10 years ago in this area at the median price point, you would see a 73% appreciation. Averaged over 10 years, that's 7.3%/year. According to Zillow, the national average home appreciation rate is between 3-5%, so I'd say we've done pretty well.
Is it going to happen again?
Well, no one can answer that for certain, but I don't see it. The government changed many aspects of lending laws to help prevent the unscrupulous lending practices from pre 2007. The climate among lenders and real estate agents is no longer one of encouraging people to buy as much home as they qualify for. Now it's about making certain people are realistic about what they can afford for the long run. If interest rates and home prices continue to rise, we will see a slow down in purchasing due to affordability, however. The National Association of Realtors expects home sales to flatten and prices to continue to increase but at a slower pace.
Millennials have become the largest segment of homebuyers, and many of them are ready to be move up buyers to higher price points. 2020 is expected to be the peak year for millennial home buyers so demand is going to be there. Even if the appreciation slows or flattens, even if there is a small decline in home values, the perfect storm of unethical practices that lead us to the last crisis has calmed. If you are a speculator hoping to buy and sell quickly with market changes, this may not be a profitable time for you. However, if you are a typical home buyer who is looking for a place to live that will work as a good long term investment for you, I would feel very safe buying a home.