Housing Market Holds Steady: Why It Hasn’t Collapsed.

It seemed the real estate market would tank along with the stock market. However, the fundamentals of the real estate market are far more solid than they were in 2008. Here’s the key fundamentals that have kept afloat so far.

For more in depth explanations of the following, please watch the video above.

Building Supply:

Everyone’s  aware that home owners got slammed in the Great Recession. But so did home builders. This left a lot of fear in the building industry, slowing new builds greatly, reducing overall supply of homes for sale.

Additionally the costs of materials and labor just kept going up, and with home prices not eternally rising anymore, builders had to operate on tight margins. Slowing new builds even more.

Lastly financing got tougher on the builders as well. Constraining financing to build more homes. Which leads me to the section:

Disciplined Lending Practices:

If America learned anything from the Great Recession it’s that disciplined lending practices are a must. By having sub-prime lenders in nearly every neighborhood, you essentially put a little time bomb that was bound to go off in every community in America. I frame it this way because the sub-primes had to fire sell their homes, which gave the rest of the homes in the community horrible comparable sales, directly ruining home values on a street by street level.

Interest Rates

Rates are at historic lows. Meaning monthly payments are relatively affordable. So if your rates so cheap…why move? If you want to buy and can…why not? With low rates it keeps sellers from selling and keeps buyers buying.

What’s Happening Moving Forward

Prices will likely dip a few points but overall markets seem likely to regain their ground by the end of the year. If anything Phoenix was #1 in the country for housing price increase year over year, at 8% so it’s not like we’re hurting.

For the enterprising investors looking for to seize the moment and grab great deals, yes there are a few more than normal, but stimulus and  forbearance programs are keeping things steady overall. I’m seeing you can improve your cap rate by about .5% right now. Overall, if you’re buying I suggest a buy and Hold strategy given the dip hasn’t been too steep.

Please note that these are not normal market times so my consensus of the road ahead is subject change.