There are key differences in the market today versus the early 2006
Cervone Deegan + Associates knows that homeownership is undoubtedly one of the biggest goals of many and is often regarded as the American Dream. Before reaching the 1950’s less than half of the country owned their home while after World War II many veterans sought the assistance of the GI Bill to buy their first house. Ever since this time the rate of homeownership has grown to a current level of over 65%. The growth rate has been steady with the exception of a few years between 2006 and 2008 during the last bust that we experienced in the market. Having felt that dip in our not too distant past may make many concerned that we may see this dip occur again. To compare and contrast then to now, here is a closer look at some differences.
Why The Market Crashed Then
Back around 2006 there were many foreclosures in the market that drove home values down significantly. What occurred was many buyers were not exactly qualified for the mortgages that they were approved for. Furthermore, many homeowners cashed in on a significant amount of equity on their homes. When prices had dipped they found themselves upside down where many walked away from their homes. This added even more foreclosures to the market which resulted in lower neighborhood home values.
Why The Market is Different Today
Today’s real estate market is different for two primary reasons. For one, demand for housing is actually real this time. Back in 2006 banks would build demand by lowering lending standards so that a larger pool of buyers could qualify for homes that normally would not. Today’s buyers along with those refinancing are facing much stricter qualifications than back then. So by contrast today the demand for homeownership is actually real especially where the importance of home has increased in value due to the recent pandemic.
Another reason why today’s market is different is that homeowners are not using their homes like they did back then as personal ATMs. In the early 2000s many were thinking the rise of home prices was not going to end so they were pulling out equity and buying other things like more homes, cars or other big ticket items. Shortly after when prices dropped they found themselves under water leading to foreclosures. Today’s homeowners have not forgotten what happened then and have learned from it and are not following this same behavior.