Majority of Home Sellers & Buyers Worry About a Housing Bubble & Price Crash
Naturally, home sellers and buyers are often concerned about home prices. It’s an asset class they either own or are considering owning. This concern becomes even greater when the impacts of the Great Recession and 2008 housing collapse are still visible in the rearview mirror for so many people. In 2017, ValueInsured surveyed 1,079 adults and 58% agreed there would be a “housing bubble and price correction” in the next two years (sometime in 2018-19). That was up 46% from the previous survey. Meanwhile, 83% of respondents believed it was a good time to sell their home. As prices have only climbed higher since the survey so too have consumer fears about a “housing bubble and price correction”. This is one of the most popular questions I receive from my buyers, sellers and investors alike – Are we in a housing bubble?
Here are a Few Warning Signs by So-Called Experts – Do They Have Any Value?
You can Google the topic “housing bubble” or “housing crash” and find a number of search results leading you to articles. Here’s an example of warning signs I read in just one article today.
Most Warnings by So-Called Experts Don’t Dig Deep – Context Means Everything
The above warnings on their own could appear problematic, but context means everything. Most warnings don’t dig deep and lack serious analysis. For example, consider the warning about the precipitous rise in the homebuilder index. While true, the index is also part of the overall stock market which has risen the same 400% since the March 2009 bottom. While a 400% rise in homebuilder stocks on its own appears large, it means very little when put in the context of all the other ships rising with the tide. Moreover, housing stocks still remain well below their former 2005 price highs.
Yes, the Case-Shiller index hit an all-time high in 2016, but context here is equally important. The all-time high technically occurred when the former 2006 high was eclipsed last year. However, this happened after a 10+ year recovery from the 30% decline in home prices during the Great Recession.
Likewise, statements regarding lowering the FICO score requirements are woefully mischaracterized when not taken in the context of all the other changes implemented to strengthen lending practices. The mortgage system has shifted dramatically for the better since 2008 with improvements in underwriting, technology, and quality controls. The mortgage system today is safer and sounder due to changes in credit eligibility standards following the crisis. Fannie Mae and Freddie Mac no longer participate in the purchase of high-risk, unqualified mortgages as they did prior to 2008 making the market for this paper now virtually non-existent. “Today’s mortgage system produces a stronger quality borrower with lower default risk and a much stronger mortgage securitization chain,” said Brian Kamin, Senior Mortgage Loan Officer with George Mason Mortgage.
The Graph Below Reveals Additional Compelling Context in Terms of Bubble Risk
I prepared this graph to offer even stronger context when it comes to the current state of Northern Virginia housing prices. The graph shows the House Price Index for Fairfax County, VA as tracked by the St. Louis Federal Reserve Bank. Fairfax County is the largest statistical area within the Washington, DC metropolitan region and represents approximately 20% of the metro area’s population. Fairfax County is also the largest housing sub-market in our region accounting for $9 billion of the total $19 billion Northern Virginia home sales in 2018. Fairfax County is as good of a housing barometer as any in our region.
I’ve listed below what I believe to be the most important pieces of information that can be pulled from the graph when considering warnings by others of an approaching housing bubble and price collapse.
Things are not always as they appear. Often times blanket warnings issued by print and television media pundits don’t dig deep, nor engage in serious analysis. Important context and perspective is often omitted or even unknown. Hopefully, the information I’ve provided here will position buyers and sellers to be able to better develop a more informed opinion about the probability of an approaching housing market decline and the potential impact if one occurs.
As a Real Estate Professional who specializes in the Northern Virginia region, my goal is to provide clients with the most insightful information and analysis to help them make the most valuable decisions in every part of a real estate transaction. I differentiate myself from other agents in the areas of knowledge, superior customer service, and ultimately positioning my clients with the most compelling agent value when they engage in the process of buying or selling real estate in the Northern Virginia region!
“It is with much enthusiasm that we share with you our thoughts about Tim Trainum. He his the most knowledgeable and informed real estate agent with whom we have ever dealt. Over the last 45 years we have bought and sold a combination of 26 homes, condos, and multi-family apartment buildings in Fairfax, Arlington and other parts of the country. Tim is without a doubt the complete package. He did everything we asked him to do. He gave us great information and advice and kept us informed as to his progress day by day. We highly recommend him.” – Dean and Mary Simonds
I’m happy to be known as the “Always Be Helping” Northern Virginia Realtor®. I have an unyielding commitment to being an open and honest advocate for my clients, ensuring they reach their desired outcome as efficiently and professionally as possible.
I am a full-time, licensed Realtor® who has established deep roots and knows the region. I was born and raised in the Northern Virginia area, graduating from Chantilly High School and then James Madison University with degrees in Economics and Finance. I live in Fairfax with my wife Liz and our seven year old son Robby. I’m a homeowner myself and understand the important decisions my clients face when they’re buying or selling a home. In addition, I’m an owner of investment property, including a multi-family apartment building. I have a penchant for helping people having taught adult education courses in investing and personal finance, and helped numerous clients, friends and colleagues in creating a path to wealth creation. I also serve as the trustee for a private charitable memorial fund.
I have been working in the real estate industry helping clients for over 25 years. As a Listing Agent, the value I create for my sellers is to help them elevate and showcase home condition. I use multiple valuation techniques to pinpoint market value for my sellers. I use cutting-edge marketing strategies to promote widespread buyer awareness and produce the maximum selling price in the fewest days possible, while protecting my seller’s best interests throughout the complete selling and settlement process. As a Buyer’s Agent, I help my buyers locate the home that changes their life. I guide my buyers in structuring the most compelling offer that can win seller acceptance, while retaining the most value and equity possible for buyer benefit and in a manner that protects their best interests throughout the complete buying and settlement process. I have worked with clients in the purchase of investment property, helping them to prospect property as well as evaluate all the financial metrics important to making the investment. My real estate experience includes working in the development, construction and operation of real estate infrastructure projects, closing over $500 million, as well as supporting several commercial real estate clients in the pursuit of reaching their objectives. My experience spans across consulting with clients on remodeling and home improvement projects to negotiating land purchase agreements and easements, to negotiating residential and commercial leases. There are few areas of real estate that I haven’t touched and it continually has been with an “Always Be Helping” and superior customer service mind-set.