4 Strong Reasons Why This is Not 2008

Logan Mohtashami an economist with Housing Wire wrote a great article last week on why today’s red-hot real estate market is so different from the market beginning in 2005. Here are 4 facts he covers--
· From 2002 to 2005 we saw immense speculative demand as “investors” were buying brand new homes and flipping them quickly in hopes of making a buck. This worked for a short time; then the walls came crashing down. Today there is almost ZERO speculation when it comes to buyers.
· This speculative demand led to the creation of exotic mortgages to find ways to approve these buyers. Back then we had Option ARMS, many interest-only loans, 100% financing down to a 540 Fico, No Income No Job No Asset loans too which I affectionally called “Fog a Mirror” loans. For the last 10 years conventional loans on average had Ficos greater than 740 and sometimes 760 with full income verification, asset verification and over 95% of all mortgages have fixed rates. Thus, the delinquency rates have been TINY. Who’s won the bidding wars the last 8 years? Clients with awesome credit, lots of money down, and low to debt-to-income ratios. Thus, there is almost no risk of foreclosure or short sale especially with home values soaring. Who in their right mind would give up $100k, $200k, or $300k in equity to their lender? People will find a way to make their payments.
· We are currently witnessing the greatest organic housing demand since the 1950’s as Millennials turn 30 and older by over 4 million people every year for the next 3-4 years. Back in 2005-2009 the numbers of people turning 30 then was down around 3 million a year or 25% less than today.
· Nationally months of inventory was over 6 months from 2006 through 2011 with a high of 10.4 months in 2008. Today months of inventory is about 2.5 months across the nation, which is a HUGE difference.