IS A BUBBLE COMING? OMG!!!

People are worried! So many people are holding off on buying or buying and selling, bc they’re worried.  Or bc they think they’re going to save money by waiting for some bubble to pop. So many of my friends and clients keep asking about it… I see online, people constantly posting like they have some special insight, and they are fully confident (without referencing anyone other than themselves) that a bubble is here and that it’s about to burst… And then of course… Questioning who are the experts that people keep talking about.  I think this is a great question. I want to talk about both – who are the experts, and – is there a bubble coming, why or why not?

Hi, I’m Tanja Odzak, Our East Bay Home brokered by eXp Realty, and let us first  revisit what happened 2006, and WHY… it will help us understand now better.

What Caused the Housing Crash 15 Years Ago?

Back in 2006, there was a ton foreclosures. That drove down home values dramatically. The two main reasons were:

1. Many buyers were not truly qualified for the mortgage they obtained, lending guidelines were TOTALLY LOOSY GOOSY… and this led to a lot of homes turning into foreclosures.
2. LOTS homeowners cashed in the equity on their homes. People figured home values would keep going up… and kept cashing their homes out… pulling money out of their houses, kinda like ATMs….  So that when prices dropped, they were underwater (home was worth less than the mortgage). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more.

This cycle continued for years.

WHY IS TODAY… not like then?

We have a real actual demand for homes today… 

Back then, Running up to 2006, banks were creating artificial demand for houses by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Like LITERALLY ANYONE could get a loan… 

This was ridiculous… Because every time a bank loans money, they take on a risk. Back then banks took on a lot more risk both with the individual and the loan they offered. This led to massive amount of people defaulting on their loans, foreclosures, and falling prices… Because they never verified whether anyone could actually afford the house they were buying. 

In today’s world, because of everything that’s happened, a lot of people have been really reevaluating the importance of owning a house and going for it. On top of that the lending guidelines are so much stricter, people are much more careful, and equity is way up. 

If you know anyone that has gotten preapproved recently… they will tell you how exhausting it can be to provide all those documents, statements, everything for the underwriters to review your asset profile, do your credit score, etc etc. Back then… they just ASKED. NO VERIFICATION OF INCOME.. It was “STATED” INCOME. 

Here is a chart for lending standards, sourced from the Federal Reserve. This is the volume of loans (in billions) with a credit score lower than 620.

OK, so who are the experts and what are they saying?

Let me start with this chart…. It’s home price forecasts for 2022.

WHO are the experts? Look at the bottom:

Fannie Mae, Freddie Mac, CoreLogic, HPES (Home Price Expectation Survey), NAR (National Assoc of Realtors), Zelman, and the MBA (Mortgage Bankers Association). You can google them all.

Moreover, look at the green bar… the AVERAGE of all 7 Forecasts. That’s a PLUS 9% home appreciation forecasted for 2022 in real estate.  Sure, anything can happen… we have lots going on in the world right now (Inflation, instability in Europe, and what is Fed doing to get inflation under control), but according to these experts, they are saying NO BUBBLE is forecasted.

Also, foreclosures are at an all time low… in fact, super low, this is partly bc of the moratorium on foreclosures in the last couple years, but also because it’s gotten HARDER to qualify for a home loan. 

Heres the chart for foreclosures.

What about interest rates?

Forecasters are saying that interest rates will continue to rise, but not as fast as they have over the last 4 months.

What about prices if there is a Recession?

Well, that’s a video for a future time… but just know that 4 out of the last 6 recessions, home values IMPROVED.

​​Feel free to reach out to me, at no cost or risk, for a hassle-free strategy session. And ask me about my tiered home selling plans where you get to pick which real estate services you want and the fee you pay… offering you simplified and transparent choices! Tanja Odzak, Our East Bay Home AND eXp Realty and I’m always here to help. Reach out anytime even if you’ve just got questions.

I’m a Top Producing Realtor® in the OAKLAND / BERKELEY / EAST BAY AREA. I’ve been in the San Francisco East Bay Area since I came up to do my undergrad at UC Berkeley (a long time ago!), with a short stint at UC Davis while getting my Master’s. I take my duties as a Realtor® and Fiduciary very seriously, I enjoy educating my sellers and buyers along the way. Putting People, Before Profit. 

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