Real estate prices have risen tremendously over the past year and a half, but some people think prices are due for a major correction in 2022. I know of many buyers who are sitting on the sidelines, patiently waiting (and hoping) for the “bubble” to burst.
I get asked frequently if prices are about to tank like they did in 2008. In some ways, it does look like a repeat of that scenario. First, there was a big negative shock to the US economy. Last time it was the dot-com bubble bursting followed by the 9/11 tragedy. This time it was COVID-19. After each crisis, the federal government stepped in with huge financial incentives to shore up the economy. Eventually the economy turned around and boomed again.
Back in 2005-2007, the real estate market overheated, partly due to all the government stimulus programs in response to 9/11. This led to irresponsible lending practices where lenders were giving out loans that the borrowers couldn’t afford to repay (and the lenders knew that…). This all came crashing down in 2008 and it took YEARS for real estate and stock prices to get back to their 2008 levels.
In 2020 and 2021, the federal government’s financial response to COVID-19 has FAR outpaced the stimulus from the last several crises—combined! So does that mean we are destined to have things overheat and crash like last time? There is a LOT to consider, so I’ll break that all down over the next several weeks. The short version is that it doesn’t appear to me that we are headed for a crash in prices (unless another major unexpected negative event happens). I’ll lay out the evidence in upcoming articles and you can decide for yourself.
If you have questions about real estate, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free, go to: www.SharpHomesOnline.com. Sharp Realty. #01245186