Why The Housing Market Won’t Crash Like 2008

hey guys welcome back another week of Mortgage Matters in Minutes again I'm your host Brent Rasmussen, owner of Mortgage Specialists hopefully you've been tuning in each and every week to gain some added information about the mortgage and real estate market and today is a special topic that we've covered a little bit before but we're going to continue to give you an update here in 2024 since we're basically halfway through the year or more and already the days are getting shorter which I hate to say because I'm a hug huge lover of Summer and getting out to golf and going to the lake and playing some wheelchair softball but people are constantly talking about the real estate markets and especially in the summertime is when most activity happens the reason why a lot of activity happens with housing is because people are out of school and they want to transfer school districts a lot during the time that they're off and they have more time with kids and some take off time from work for the summer months but generally it's always around schools people are relocating for their kids and that's why the change happens So today we're going to talk about again why a housing market won't crash like it did in 2008 and the facts behind that and we've chatted with lots of clients through the last many months because they don't like where the prices are currently and they're waiting for something to adjust and change because the last couple years have been a little stagnant since COVID and today we're going to kind of cover some charts here that really document and show why we feel strongly about the market and this isn't just us these are economists that track the national standings of where housing is was and is going and that is going to allow us to give you some facts of why we feel strongly about where we're at currently we just don't see a crash happening because there's just not enough Supply that out there so what makes up our supply obviously listings new construction and any foreclosures or short sales that come about that's where the supply is at and right now the supply is under where we need it to be to make it be a crash when we saw 2008 we had many more houses for sale very high Supply and low demand because people were unsure what they're going to do with their jobs how they were going to pay their bills what the economy was going to do next similar to when we started COVID in 2020 when a lot of businesses were forced to be closed by States people were unsure what the future looked like and anytime we have that uncertainty we don't know what's going to happen next people choose to stay put and don't make any kind of major decisions sometimes that's talked about during election years which 2024 is as well people are uncertain but after election happens not much changes right away anyways it takes years for laws and rules to get put in place so let's talk about a little bit the supply and demand here next in regards to some graphs that we have kind of put together that we thought would be very interesting for you as the consumer to see and I know on Instagram here today on our live feed you're not going to be able to see these but we're going to share these here on our Facebook live feed but also on our YouTube channel so we can get our mortgage matters and minutes details so here's our first graph that makes a lot of sense because we color-coded it here and if you look at the Red Bar obviously that shows 2008 it shows our annual inventory of homes okay so anytime we look at houses that are for sale our economists look at how many houses or how many months it take to turn over all those houses that's what this graph is showing us on average from 199 to 2023 it takes about 5 months 5.3 months for houses to turn over all the way through and you can see in 2008 we had 10.4 nearly double that but if you also look at the last few years especially this year we're at 3.7 last year we at 3.1 2022 we're at 2.7 2.3 so that number has been going down but we're starting to go back up and we're starting to see that because obviously 100% of these decisions being made recently are either price driven or interest rates both of those are making the payment a little bit more High than people would like them to be so until we see a massive amount of housing inventory we don't anticipate any kind of major crash and that doesn't happen overnight unless all of a sudden we see a massive unemployment number just come out of the blue and tons and tons of people are laid off which obviously can happen but something major has to happen for that you curve obviously our second slide here is we talked about inventory how many months are houses for sale next is Builders how are they doing on keeping up the amount of Supply that's needed and again graph is color-coded here and it shows there through the years prior to 2008 we had the four most highest number of units being built in history so since it's been in Back to the late 60s early 70s so you can see shortly after that crash in 2008 Bankers were hesitant to give Builders money and so because of it a lot of developing very much slowed down so you can see in 200 9 10 and 11 there some of the lowest numbers of Builders keeping up with houses just because there were plenty of houses for sale if we go back to the previous slide and 2009 and 10 we had a lot of inventory there for sale so Builders did not need to build as many properties because there were plenty of houses so you can see this is kind of a inverse relationship those previous years of where we see this low to be and you can see that Builders are really just catching up with the amount of Supply that's needed we're still kind of not even at the anywhere close to any kind of a peak of building and there's a lot of reasons why building isn't as you know rampant as it can be or it was in prior to 2008 you know cost of goods cost of land people to actually do the labor and the work themselves all these things factor into you know how housing can be created or built moving forward the last slide is something that we've been chatting about for many years is that some people say well let's wait for something to happen because foreclosures will come and again as you can see in this chart in 2008 and 9 10 and a little bit of 11 are some of the highest months we've ever seen or years I'm sorry highest years that we've seen for foreclosure rates because people were losing their jobs they had adjustable rate mortgage they didn't have the income to make their payments and most of the houses that went into foreclosure they didn't have enough equity in the property to break even by selling they lost money and had to pay for money by selling so they said why not we just let the house go so as you can see you know after 200891 lending really tightened up and standards were have been kept the same and are very much stringent throughout time and you can see that foreclosure number going down and the reason why it's gone down is because of Landing standards but also as Equity Rises if you do have a problem affording the home that you're in and making payments you can turn around and sell that property you know gain your money back and move forward you know some very low numbers there and in those few months you can see are quarters from 2020 to 2022 there was the Foreclosure moratorium that was put in place during COVID to not allow lenders to start foreclosure proceedings in that regards so we're seeing some catch up from that obviously but still in regards to foreclosures we're at some of the lowest foreclosure rates of all times so there's a little data there today that chats about the inventory problem that we have it's a supply issue not a demand issue we don't have enough Supply we don't have enough houses for the amount of people that need them and that generally is happening across the country in every state it's not just here in Omaha Nebraska we're seeing that happen all over the place and some you know consumers borrowers ask us what should we do you know many are forced to wait but explain to people that as interest rates come down there's still going to be that high demand and not enough Supply because of many different reasons and I contribute one of the reasons I've chatted about last week is that our seniors are living in their houses and are living longer so they're staying in their houses longer so they're taking up some of that Supply that's happened throughout the previous years 10 20 years people would pass away or vacate their houses earlier on but thanks to you know Health reasons and medications and all kinds of things people being healthier you know they're living much longer as time presents itself so moving forward we don't know where not the crash or where the correction is where what's going to change and most of us don't anticipate a lot if you have the money and the wherewithal to purchase something you know still continue to move forward with your decisions because home values are still going to continue to rise we don't anticipate any kind of major correction and we can see those Corrections coming they're not going to all of a sudden jump from the bottom lowest that we've seen on some of these graphs of all time to the highest it just doesn't happen that way as you seen the graphs they go up and they come down they go up and they come down they don't always you know make immediate drop the next year unless something super goofy like a pandemic happens that none of us are able to control so does that help you in making your decisions I don't know a lot of people still don't like the numbers that we presented I don't disagree they're not very fun for first-time home buyers to be in this particular Market but all of us were in some kind of a unique Market at the time you know if we look back at history we've been through Wars and recessions and depressions and all kinds of things and there's never no matter when you were born no matter when you're retired when you're you know getting out of college all of us over time goes through some interesting financial markets and we're just happen to be in one of those right now hopefully we'll see rates lower this year and that might help some buyers afford more but I think as we see them afford more the prices of the homes are going to continue to rise because activity is going to you know increase with the amount of buyers that are sitting on the Wayside or on the sideline right now waiting for something to change again buying a home is not for everyone affordability is not everyone as well too so looking at your overall picture and figuring out and planning ahead how can I continue to save money how can I continue to get pay increases through job promotions or company promotions and working on your financial picture as a whole because home ownership is one of those major parts to understanding how you create wealth over your lifetime I hope you learned something here a little bit today we'd love for you to tune in each and every week on our channel here mortgage specialist and our series called mortgage matters and minutes I'm Brent Rasmussen, owner of Mortgage Specialists call us at any time 402-991-5153 or check us out on our website at mtg-specialists.com we'll see you here next time Mortgage Specialists driven trusted reliable