4 Stats That PROVE This is not 2005 All Over Again!

not 2005Are you worried about jumping into the housing market because you believe we are in another bubble like the one that occurred in 2005?  According to realtor.com you don’t have to worry about that situation again.  They checked out the four red flags below and found very good news for our market.  The situation is nothing like it was in 2005.  Also, another statistic to add to this article is that it is now much more difficult to get a mortgage.  This becomes a headache when you are in the buying process but also assures that the mortgage company is doing their due diligence and not getting you into a situation you will not be able to afford in a few years.  You may think that the mortgage company asks for too much paperwork and they do but they are making sure that what you are saying is true and that you have the ability to pay back the mortgage in the long term without going into short sale or foreclosure.

Courtesy of Keeping Current Matters August 2016

Recent research by realtor.com examined certain red flags that caused the housing crisis in 2005, and then compared them to today’s real estate market. Today, we want to concentrate on four of those red flags.

  1. Price to Rent Ratio
  2. Price to Income Ratio
  3. Mortgage Transactions
  4. House Flipping

All four categories were outside historical norms in 2005. Home prices were way above normal ratios when compared to both rents and incomes at the time.

They explained that mortgage transactions as a percentage of all home sales were also at a higher percentage:

“Loose credit was one of the main culprits of the housing crisis. Mortgage lending expanded dramatically as unhealthy housing speculation reached its peak and was met by the highest level of credit availability as measured by the Mortgage Bankers Association. The index measures the overall mortgage credit condition by the share of home sales financed by mortgages. This metric does not capture credit quality, but it does set a view of the importance of financing in supporting the housing market.”

House flipping was rampant in 2005. As realtor.com’s research points out:

“Heightened flipping activity is a clear indication of speculation in the real estate market. A property is considered as a speculative flip if the property is sold twice within 12 months and with positive profit. Flipping is a normal part of a healthy housing market. In an inflated housing market, expectations about short-term profit from pure price appreciation are very high; therefore, the level of flipping activity would show evidence of being heightened.”

Here are the categories with percentages reflecting the unrealistic ratios & numbers of 2005 as compared to the current market. Remember, a negative percentage reflects a positive gain for the market.

4 Stats That PROVE This Is NOT 2005 All over Again | Simplifying The Market

Bottom Line

They say hindsight is 20/20… Today, experts are keeping a close watch on the potential red flags that went unnoticed in 2005.

Remember it is always toasty in Naples and you deserve your piece of Naples sunshine and the ability to own a home and repay your mortgage.

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