Will The 2008 Crash Repeat Itself?

Since 2014, the real estate market has been identified as a Seller’s Market. This means that there are more buyers seeking homes than sellers willing to sell. In a Seller’s Market, sellers are able to price and sell their homes higher because the demand for homes is higher than the number of homes available. This often results in a multiple offer situation and drives up the price of homes. At this point in time, home prices have been driven up to a point where they are so incongruent with average incomes that the cost of living ratios are insufficient to sustain buyer activity. Simply put, people are not being paid wages high enough to purchase a home.

Many consumers are worried that the rising real estate prices have constituted a “bubble” and will lead to a market crash like the one in 2008. While the real estate market will likely change due to the increasing prices and a decrease in sales, predictions show that a crash as profound as the one in 2008 is unlikely because “that crash was caused by forces that are no longer present”(TheBalance).

Experts do not predict a repeat of the 2008 crash for the following reasons:

Mortgage brokers have become more strict about to whom they give loans. According to InvestFourMore.com, subprime loans, loans given to those with poor credit scores, were at a high point totaling $620 billion in 2005. Now, subprime loans make up only about 5% of mortgage loans (InvestFourMore).

When adjusted for inflation, home prices are not any higher than they were in the 2006 peak, and are actually more similar to prices in 2004. “Between 2012 and 2017, home prices rose 6.5% a year on average. Between 2002 and 2006, they rose 7.5% annually. In 2005, they skyrocketed 16%”(TheBalance). While prices have risen, they have not increased as dramatically as they did in 2005.

However, despite the predictions, unexpected factors may contribute to a crash. Factors like rising sea levels, high interest rates, and Trump’s tax reform plan could all have destabilizing effects on the real estate market(TheBalance).

Overall, a crash is not likely. The market may come to a standstill for a while due to rising home prices and stagnant wages, but that will just force sellers to lower their prices.

What’s Going On In The Maine Real Estate Market?

In April, we shared with you an update on the current real estate market. which was, and still is, a Seller’s Market. Houses are entering the market, receiving multiple bids, and selling quickly, often under one week. This is great for sellers but is proving to be difficult for buyers because decisions must be made quickly, and buyers are bidding against each other driving up the prices.

“A strong 2019 will be dependent on the number of existing homeowners looking to sell. These existing owners are also impacted by the limited inventory and are hesitant to put their homes on the market because they’re not readily finding their next housing option.”

— Peter Harrington, 2019 president of the Maine Association of Realtors, via MaineBiz.com

In a market update from MaineBiz on May 22, 2019, they shared that sales of single family homes in Maine have risen by 4.8% and the median sales price has increased by 5% to $210,000 since last year at this time.

What You Should Know About Maine’s Current Real Estate Market

With lots of buyers and fewer sellers, the Maine real estate market has been what Realtors would call a “Seller’s Market” for a few years now. This means that it was common for houses to go on the market, get multiple offers, and sell very quickly.

In a Mainebiz article published on March 25th, 2019, Mainebiz staff wrote that the “Maine single-family home market may be balancing out”. This means that throughout Maine, the amount of homes that are selling are less than last year, however the prices of homes are still increasing in 10 of the 16 counties in Maine. Because of this, Gray Fox Real Estate’s Designated Broker and Owner, Polly Cockrill, believes that in most of Maine, it is still a Seller’s Market.

If you are selling…

Take note of the fact that the number of units being sold is decreasing, despite it being a Seller’s Market. What can you do to make sure your house sells?

Advertise. Your agent should be using social media to market your home. Share their posts to your personal page to spread the word of listing, open houses, and price changes!

Prepare your home. Even in a Seller’s Market, a deep clean and organize will never hurt. “Wow” your potential buyers by taking the extra time to clean and de-clutter, and add decor that will make it feel like home to them.

Communicate with your agent. In a Seller’s Market, things can move fast. It’s important that you are communicating with your agent so you are prepared for last minute showings or multiple offer situations. They will be able to give you advice and lay out your options.

If you are buying…

Know what you are working with. Before you start looking at houses, get pre-approved so you know how much you can actually afford. The last thing you want to do is find that dream home and miss your chance while waiting for your pre-approval. Check out our Featured Lenders if you need a recommendation!

Find the right agent. In a Seller’s Market, your search may take a little while. Find an agent whose priority is to help you find the right home, not just make a sale. The right agent will perform due diligence to uncover potential issues in an otherwise good looking home to protect you financially.

Be realistic. When you sign with your buyer’s agent, you will discuss you wants and needs in a home. It’s important to be realistic about what you can afford and what you want in your home. Ask your agent to show you houses that have sold in your price range and desired area to see what you can expect. Consider looking in neighboring towns if your budget and desired location aren’t lining up.