- This topic has 1 reply, 2 voices, and was last updated 2 hours, 22 minutes ago by
.
-
-
I have lived thru several big housing crashes, and by lived I mean I worked in mortgage financing during those crashes. I was a loan officer in 1987, a mortgage underwriter for a national bank in 91-93, I managed a REO department (sold repossessed properties) for the same national bank 93-95. I owned a pretty sizable mortgage company from 1998 to 2009. Soup to nuts experience. Don’t believe the YouTube bros that keep saying a huge crash is coming.
Why will a 2008 level crash not happen?
1) The banking and bankruptcy reforms made the path to a 2008 style crash much narrower. The bankruptcy reform made it more expensive and less advantageous for consumers to file for bankruptcy. It gave creditors tremendous leverage. Dodd Frank regulations established strict underwriting guidelines that eliminated loans to risky borrowers and eliminated unverifiable income loans. Those two changes alone changed everything. There was a massive rise in bankruptcy filings and foreclosures in 2008 right before the recession. By law that cannot happen.
2) The rise of the 30 year fixed rate. The 2008 crash was nicely set up by lax underwriting, ie, no income verification and loans to low credit score consumers with low down payments using adjustable rate mortgages. Since the crash it has been all fixed rates, all to high FICO borrowers ( good credit) and full income documentation.
3) Different from 2008, hardly anyone is underwater, everyone is sitting on oodles of equity. Even if folks lose their jobs, they can get out by selling the home and avoiding a foreclosure.
4) Builders for the most part have avoided overbuilding, especially in California. California is the economic engine of this country, generating over 14% of the entire U.S. GDP. With (GDP) exceeding $ 4.2 trillion, it’s California not some hillbilly state with an illiterate population.
Parts of Texas and Florida have overbuilt but a crash there will be contained to just them.
If you have been waiting for a crash to buy, I hate to tell you but it is not likely to happen. A price deceleration and maybe a 5 to 10% correction is more likely but that’s not a crash. 2013 to 2019 I invested every penny I had into SoCal real estate. Not because I saw a huge appreciation wave coming but because I was looking for the cash flow rents generate. Turned out to be a genius move. Better to be lucky than good they say.
Carry on.
-
- You must be logged in to reply to this topic.