Is a Massive Market Correction Coming?

Here’s why our present market is nothing like it was back in 2008.

Are we about to have another market crash or a huge correction? Prices are currently increasing just like they were in 2008, so I understand why people are asking this. However, in 2008, I had a different answer to that question than I do today. 

In 2008, lenders were lending money to people with no jobs, bad credit, and signing them up for adjustable-rate mortgages. In some areas, half of the mortgages were two-year fixed rates and adjustable after that. Some of the mortgages I saw doubled in price after two or three years. Back then, the market was also overbuilt; there were too many new homes being built for the number of buyers in the market. In 2008, people were also buying homes based on speculation; they were getting more than they could afford and thinking their values would rise in a year or two, then they’d sell and make a profit. 

The rapid growth of prices will likely slow to a more standard rate.

There are plenty of differences between the 2008 market and our 2021 market. These days, our lending practices are normal and rational. You have to have a job, good credit, and there aren’t many (if any) adjustable-rate mortgages. Also, as you may know, there isn’t an overabundance of homes being built to flood the market. Now people are buying the homes they need for their families rather than buying out of speculation. 

These are the reasons we’re very unlikely to see a large price correction like in 2008. However, the rapid growth of prices will likely slow to a more standard rate. We can’t continue to support a 12% to 15% increase every year. I think we’ll see a normal, 5% to 6% increase every year moving forward. 

If you have any questions about our market or real estate in general, call or email us. We would love to help you.