There have been a few articles popping up, questioning whether or not we are coming to the crossroads of a “Bubble in Price Appreciation.”
The answer to those who write erroneous articles and rumors, is an absolutely resounding no.
One reason, is that when we had the “crash and burn” in 2008, values plummeted and we saw great losses in most of the U.S.
The National Association of Realtors reported recently that, although we are above the highest price point back in 2006-2007, we still have not approached a “bubble environment” due to the following facts:
1. If you consider average home price appreciation at normal historic levels of 3.6 percent annually, and factor in the down years, we are still below “bubble territory.”
2. Lending restrictions (Dodd-Frank Law) that were put in place after the downturn, have enabled those that qualify for mortgages with the proper income, sufficient credit, and debt/income ratios.
No documentation loans are out, although there is a new loan appearing based on receivables if self employed at least two years (call me to discuss).
So, again, no bubble in the lending arena.
However, 71 percent of buyers put down less than 20 percent in May 2017; and 60 percent of first-time purchasers put down less than 6 percent nationwide. (keeping current matters).
So today, you don’t need perfect credit scores or 15-20 percent down.
However, these numbers don’t necessarily reflect our local areas, but provide an indication of how much easier it is to enter the market , as long as the requirements are met, which didn’t exist 10 years ago!
3. Although we have an amazing demand from various groups (Asian, millennials, single men and women, (24 percent of all recent purchasers were single) repeat buyers, move up crowd), there is not enough inventory to satisfy the current demand.
4. Inventory is, as I have mentioned in my previous article, at historic lows, so, there is no bubble in inventory.
5. Building permits plummeted and were almost non- existent, between 2008-2013, since most every small to medium sized builder had to sign personally, so they headed for the hills, creating a drought of new construction for that period. So it’s now “catch up baseball” to try and satisfy the demand for all those able and looking to purchase; which I believe is many years down the line, hopefully keeping this market going along at a healthy pace.
So, bottom line there is no bubble, and as I say “beg, borrow and steal (only kidding) to find your first or next place to call home and build roots in your community and not be subject to increased rents, no write-offs, decreasing your “wealth” and the security of never, ever having to have your landlord, say, I am not renewing your lease, for whatever reason!
So, as I say sometimes, don’t believe everything that you read and much of what you see, when it’s “negative news” or “doom and gloom propaganda.”
Papers are trying to survive and will, in many instances, focus on any negative report or rumor to potentially scare the public, with “fake news” to sell as many papers as possible just to keep that industry in survival mode, as it has been dying since the advent of the internet.
Again, As I mentioned in previous articles, it’s the perfect storm scenario for both sellers and purchasers.
You cannot beat those low, low interest rates, enabling most to buy with a monthly cost lower, even though prices are going up, than renting (more economical to rent in 48 out of 50 states, as per N.A.R. 2017).
Incomes have also risen, enabling more to enter the market in the last five years.
Almost half the summer is gone and fall and then winter will be approaching, once again, and if you are a seller, are you ready to continue paying our local exorbitant taxes, pay the costs of heating your home, making sure none of your pipes break again this winter, the physical stress of shoveling the walkways or paying someone to do this for you, etc.
It is the right time to sell and take the money and run and go relax in sunny climates all year round, what do you think?
Phil Raices is the owner/Broker of Turn Key Real Estate at 7 Bond St. in Great Neck. He has earned designations as a Graduate Realtor Institute and Certified International Property Specialist.