If you need assistance, please call 360-649-5053

Will COVID19 Cause Another Housing Crash?? | Kitsap County WA Real Estate | April 2020 Housing Update

Thursday, April 16, 2020   /   by Sarah Balduf

Will COVID19 Cause Another Housing Crash?? | Kitsap County WA Real Estate | April 2020 Housing Update




Common Questions We Keep Hearing

There is a lot of confusion and understandably so, which is why this month’s Housing Update is a bit on the lengthier side.

 

·        Are we heading for another housing bubble?

·        Should I list my house now or keep it listed? Or wait until things settle down?

·        Is now a good time to buy or should I wait and see if prices will go down?   

 

If you have time to watch it, we encourage you to do so as it contains some valuable information and insight into how the housing market works, what affects its volatility, and what we can expect to happen into the near future. If you don’t have time, below are the top takeaways.

 

What’s The Market Doing Now?

Dennis compiles information he’s gathered from half a dozen industry gurus at the national level, along with local history and statistics that come into play. Locally in Kitsap and surrounding areas we are a bit more accentuated due to military and tech company influences, but we do follow national trends.

1)     We’ve seen a decreasing inventory of homes year over year for years now. Keeping in mind we always have lower inventory during the winter months than in the summer months, this last winter inventory was the lowest we’ve seen yet.

2)     Median asking price has been going steadily up for the last few years and continues to do so.

3)     Homes are still selling, despite rising prices and lack of inventory. Pending sales have been fairly consistent year over year, with not enough new construction happening to keep up with the demand for housing.

 

 

Is The Coronavirus Going To Cause A Housing Crash? We Don’t Think So... Here’s Why:

There were 3 underlying components that caused the crash last time, what Dennis calls “pulling the Thread on the Tapestry”. When one thread was pulled, it all fell apart due to the underlying basics of the market.

1)     Inventories then were much higher than today. As we approached the bubble in 2006 & 2007, inventory reached huge peaks in an oversupplied market. Once 2008 hit, inventory plummeted and has gone consistently down ever since. The supply of homes near the height of bubble in 2007 was at a 9 month supply in Kitsap! Today we are less than 1 month supply.

 

2)     We were well over-priced for homes last time. Right before the bubble busted last time, price per sq ft took a huge spike up all at once. The average growth of a healthy market is about 3.4 - 3.7% increase per year. If you average the increase in home values year over year for the past 20 years, we are right at an average of 3.5% increase year over year for homes—right where we are supposed to be. We aren’t over-priced or over supplied now as compared to then.

A part of that causation in over pricing, was due to an artificial inflation in prices by investors that would purchase homes, never live in them, then turn around and sell them for a higher price right away. This took away inventory from the average person and inflated prices artificially. Today, iBuyers were doing a similar thing but aren’t as prevalent in our market as metropolitan homogeneous areas.

 

3)     Homeowners were over leveraged in their homes last time. They owed a much higher percent on their homes, using their homes like ATMs and refinancing to pull all their equity out. Today, we have a much larger amount of equity on a local and national average.  In WA alone, 35.5% of homeowners have over 50% equity in their home. In 2018 American homeowners cashed out a total of $63 Billion from the value of their homes which seems like a lot until you compare that with 2006 when they took out a whopping $321 Billion!!

Bottom line: In the last crash we were over supplied, over-priced, and over leveraged. Today we are worlds different. Since we are not over valued or over leveraged today, it’s a good indicator why the Coronavirus won’t cause another bubble and bust.

 

Yes, But Are We Heading Into A Bubble? If So, What’s Causing It?

That being said: Housing is cyclical! It rises and falls, bubbles and busts are inevitable it’s just a matter of when will it happen. There will be another bubble and bust. The question is, when?

When we look at all the data, looking at the behavior of buyers and sellers, looking at inventory and prices, looking at interest rates…  it all suggests that we are only just at the beginning of our next bubble.

When we look back at what happened in 2001 when the last bubble started, we had a little softening of the market. But instead of having a natural rollover in the market and in values, we instead had a reacceleration of the economy in efforts to bounce back from 9/11. The feds dropped interest rates to push the economy forward and investors artificially inflated the market, which drove the last bubble.

 

Once again, we have the Feds lowering interest rates and trying to drive the economy. At the end of 2018 we had a big dip in pending sales temporarily due to when the interest rates jumped up by .5% to 1% or so. At the time it felt like the market was finally starting to balance out and we would finally have a flattening of the market. But at the end of 2019 the Feds dropped interest rates again and we had another reacceleration when buyers came back out of the woodwork.

It seems we are at the beginning of our next bubble because of some of the similarities we are seeing now to the beginning of the bubble last time in 2001. We are at the beginning of quite another large acceleration, due to our low inventory that will continue to struggle for a few more years or so. Interest rates will likely stay low since the Feds are worried about slowing down of the economy anytime rates start to increase rates. Prices will continue to go up, up, up for a while.

 

How Does The Coronavirus Play Into Today? What Effect Will It Have On All Of This?

Overall, our inventories are still tracking downwards. Combine that with the fact that there is likely going to be even less inventory hitting the market during this current pandemic simply due to the fact that some sellers simply can’t list their homes now. While we real estate agents still can and are listing homes, many homeowners’ moving plans are being delayed due to the lack of contractors being available to do the work on their homes to get them ready for the market. Still other sellers have job transfer delays, especially with the military halt on moving.

We also might have a few fewer buyers during this time because the mortgage market has experienced a bit of turbulence and have tightened down requirements on qualifying for loans.

Don’t mistake this slowdown for a turn in the market. The market will bounce back as soon as things go back to normal which they will. This means we will likely see a 2nd Spring Surge in prices when the market goes back to a bit of normalcy.

 

Bottom Line:

Market is fine… for now. We are still seeing lots of competition for homes in all price ranges up to $500K. It’s likely we are at the beginning of our next bubble, which will continue for at least a few more years before it bursts.

 

If you have questions about your specific area or price range, call us and we can get into details with you.
Dennis is at 360-649-5053



home appreciation


mortgage availability



inventory



unnamed (3).jpg



equity 2


  covid19, mortgage, resources, bremerton, bubble, gig harbor, housing questions, housing update, kitsap, market update, poulsbo, real estate, real estate news, silverdale, statistics

The Balduf Group
Dennis Balduf
9564 Silverdale Way, Suite 100
Silverdale, WA 98383
360-649-5053

Information is provided exclusively for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS. Copyright 2016 NWMLS.
Properties with the NWMLS icon are courtesy of Northwest MLS.
This site powered by CINC: www.cincpro.com