June 17, 2020
Today, data came out that showed mortgage purchase applications up 20% year over year. The graph is pretty incredible - it shows the stark slowdown and then a fast snapback:
During the coronavirus lockdowns, lots of potential buyers & sellers worried that we might be headed for another major downturn, but given the fundamentals of the real estate market, that is highly unlikely. But don't take our word for it -- let's look at the data!
For all the talk of "bubbles," as you can see, adjusted for inflation, real estate prices haven't come close to their 2006/07 peaks before the Great Recession. And the thing that largely contributed to the crash in '08 were bad loans. Compare loan profiles today:
There it is, as Willy Wonka said, "clear as crystal" - whereas the buildup prior to '08 included a lot of questionable-looking loans, today, the biggest chunk by far are loans to people w/ a score of at least 720.
Yes, quite a few loans have gone into forbearance b/c of the lockdowns and that could cause some excess inventory in the next year or so. But inventory is already extremely low in most of the country - causing a pretty extreme seller's market. More inventory wouldn't be such a bad thing.
The bottom line with all of this is you can't have a massive housing downturn with low inventory, and the spectre of a deluge of inventory like we saw in 2008 looks wildly unlikely today. So, turn off your TV and buy some real estate! ;-)
