![]() ![]() While some areas are hotter than others, one trend remains clear: demand is high and will likely remain high. I’ve talked to experts in multiple real estate markets throughout the country. While the construction industry seems to have hit a recovery point (almost a million homes were built last year), it will likely take years for supply and demand to balance again. Increased building regulations, the rising price of lumber/materials/labor, and lingering hesitation due to the crash all contributed to this – and as homes became more expensive to build, home builders were incentivized to build luxury homes rather than starter homes. went from averaging between 9 and 11 million housing starts per decade throughout the 1960s to 2000, to just under 7 million homes during the 2010s. According to the National Association of Home Builders, the U.S. Since then, however, new home construction has lagged behind, failing to keep up with a growing population. In the years leading up to the housing crash, new home construction outpaced demand – which contributed to home prices dropping precipitously. Today, the average homeowner has over $150,000 worth of equity in their home – an all-time high, which is good. ![]() Since they had almost no equity in their homes, this meant they couldn’t sell without going into debt – making foreclosure the only option. But once the market dipped, many people discovered that their loans were worth more than the homes themselves. When the housing market was good, it was easy to simply turn around and sell your home if things didn’t work out. The housing market collapsed in 2007 in part because many consumers had almost no equity in their homes – people were buying homes with no money down, and the riskiest mortgages required little proof that buyers could actually afford them. This will help discourage overly-speculative investing as borrowing becomes more expensive – helping to stave off the possibility of a bubble. However, experts seem to unanimously agree that interest rates are going to rise by up to a full percentage point this year. When interest rates drop, it encourages more investors to enter the market – because they can risk less of their own cash to do so. Adjustable rate mortgages, which tempted buyers with low introductory interest rates that rose dramatically once homeowners were locked into paying them, were much more popular (and much less regulated). Speculation was rampant in the early 2000s. They’re wary of getting fined again and so they opt to hold home buyers to high standards. ![]() There were many regulations and restrictions put in place after the 2007 crisis to help maintain a healthy housing market (such as Dodd-Frank) – and many banks were fined millions and even billions of dollars for their participation in lending fraud. The median FICO for current purchase loans is about 42 points higher than the pre-housing crisis level of around 700, according to data from the Urban Institute. Have lenders been unscrupulous in who they lend to? It doesn’t seem so. Income Tax Calculator: Estimate Your Taxes Lending Standards ![]()
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