We aren’t headed for another market meltdown like the one we had a decade ago. There are a couple key reasons why.
Looking to sell a home in Southern California?
Looking to buy a home in Southern California?
Could the market meltdown happen again?
As you know, in 2007, we had a huge market meltdown, and a lot of that was created by really bad loans. There were a lot of loans available because the market was deregulated, and people got loans that they shouldn’t have.
Negative amortization loans and stated income loans exist for a reason, but many people chose them who shouldn’t have gotten them. This trend allowed a lot of people to buy with no money down, and almost anyone could get a mortgage.
Today’s market, though, is very different. A lot of people are putting more money down, and there are a lot of cash buyers looking to buy homes right now as well. As far as prices go, we’re back to where we were in 2006, which was the height of our Long Beach market. However, there aren't as many different financing options available.
What’s changed is we’re starting to see more of those creative financing programs come into being. If interest rates continue to rise, that will have a downward effect on prices because fewer people will be able to afford the same house payment. For example, if your interest rate was 6%, your purchase price would have to come down 20% for you to have the same payment as a 4% interest rate.
Right now we’re seeing continued high demand, rising prices, and very low inventory.
It will be interesting to see what happens with interest rates and the deregulation of the mortgage industry, but right now we’re seeing continued high demand, rising prices, and very low inventory.
If you’re thinking about buying a home, it’s still a good time to lock in a low interest rate. If you’re speculating, buying for the short term, or doing higher-risk things, that may not be the best decision for you. If you plan on buying real estate and holding onto it for the long term, it’s always a good time to buy because you can always pay that property off and hold onto it as a rental property if you ever move somewhere else.
If you have any other questions about the current state of our market or you’re thinking about buying or selling a home, feel free to reach out to me. I’d be happy to help you.
