In 2020, home values appreciated by about 10%, and they’re expected to continue appreciating through this year. This has some people worried that we’re in another housing bubble similar to what we experienced in 2006 to 2008. However, it’s important—and comforting—to know that the factors driving today’s market are completely unlike those that precipitated the 2008 crash. Here’s why:
1. Inventory is at an all-time low. In a normal, balanced market, there’s usually around six months’ worth of inventory. Right now, the housing supply is extremely limited. There just aren’t enough homes to meet buyer demand. Here in Northern Virginia, our average days on market is only 20, and most homes are seeing multiple offers.
2. The demand is real this time around. Millennials are the largest active homebuying generation in American at the moment, and they’re now getting married and having children—the two driving factors of homeownership. When you combine that with historically low interest rates and a pandemic that has made many reconsider the value of “home,” it’s easy to see why demand is so strongly outpacing supply.
3. Homeowners have more equity in their homes. Between 2006 and 2008, homeowners were cashing out and getting refinances to buy larger homes. When prices dropped suddenly, they were caught upside down on their mortgages. Today, the majority of homeowners have substantial equity in their homes, meaning they could weather a sudden change in the market without having to worry about foreclosure.
The bottom line is that our sky-high demand is real, our inventory is primed to stay low, and homeowners have options if things get messy. If you have further questions about this or any other topic, don’t hesitate to reach out by phone or email. I’d love to provide some more information or refer you to some great resources.
