Can we please all come together and make a collective decision as an industry to stop saying that the real estate market is “crazy”? It’s not helping anyone.
When things are crazy, they’re out of control—and I don’t think that’s the message we want to communicate to our customers. Are “crazy” and “out of control” how you want your clients to view your workplace, business or industry—one that you’re supposed to understand?
The market is complex. The market is complicated. The market is competitive. The market is not crazy.
But guess what? That’s exactly why true professionals are needed now more than ever. Anyone can operate in a crazy market, but today’s market requires pros who are grounded and can apply the lessons they’ve learned while navigating these unprecedented times. Rapidly shifting markets like the one we find ourselves in now are what separate the winners from the hobbyists. The question you need to ask yourself is: Which one am I?
Part of being a professional is having a real understanding of what is going on right now. If you turn on the news or open just about any social media app, all you’ll hear about the real estate market is how it’s a “bubble ready to burst.” The comparisons between today’s market and 2008 are plentiful. Those comparisons would make sense to hobbyists who think the market is “crazy,” but do they make sense to a pro who knows the facts? No.
Let’s take a closer look at this comparison between today’s market and the collapse of 2008.
- It’s seven times more difficult to get a mortgage now than it was in 2008 when lenders were giving out loans to people to whom I wouldn’t have given $20. The average credit score of a borrower today is over 700. These aren’t people who don’t pay their bills.
- In the four years leading up to 2008, we built twice as many houses as were needed to satisfy demand, creating an oversupply of homes. Today, we have a cumulative deficit of 5.8 million homes to meet the current record demand. That means we would have to overbuild by 1 million homes per year for the next six years just to get back to the equilibrium of supply and demand needed for a healthy market. Does anyone see that happening with inflation running rampant in our economy right now?
- Currently, over 50% of homeowners have more than $250,000 in equity, and 37% own their homes outright. These aren’t people waiting to default. These are people ready to invest.
- Mortgage rates have risen to just below 6%, which isn’t good compared to last December. But the historical average is 8%. If you don’t buy, then you have to rent—and rental prices are at an all-time high. More importantly, do you know what the interest rate is when you rent? 100%! At the end of the day, your clients are going to pay someone’s mortgage and build someone’s equity. The question they need to ask themselves is: Whose equity do they want to build—their own or someone else’s?
- Deceleration does not mean depreciation. While many markets are slowing and are not going to see the 20% to 30% increases in home prices that have occurred in recent years, market predictions for the next five years show a steady gain of 9% this year, 5% next year and 3% to 5% the couple of years after that.
- The amount of usable equity available to homeowners grew last year by over $11 trillion. That money is going to be invested somewhere, and the housing market is looking a lot better than the stock market right now.