Are we about to repeat the housing bubble of 2008?

I weathered the housing crisis during the Great Recession that started in the fall of 2008 and lived to tell about it. The stock market crashed in September of 2008, and the home-buying brakes were slammed as the housing market plummeted off the cliff. Risky loans and shady lending practices catapulted many homeowners into foreclosure and the housing bubble popped.   

A seller or buyer's market is determined by dividing the number of active homes on the market by the previous month's closed number of sales. When that number is close to 5 or 6, we are in a neutral market. Less than 5 months of inventory is a seller's market and more than 6 months of inventory is a buyer's market. 

Technically speaking, we are in a seller's market. As of today, we have 2.8 months of inventory. That tells us that if no other home was added to our market and we continued to sell homes at the October rate of 551 closed sales, we would have no homes to sell in less than 3 months. At face value, that is a seller's market. 

But wait! There were 675 single-family home sales in Madison County during September and only 551 in October. That's a 20% drop in one month. The shock of 7% interest rates is causing buyers to tip toe around the housing market. The coming months will only tell if the inventory continues to rise, and the number of buyers decreases. We do have some options to help buyers keep rates lower.  

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The driving force is the interest rate and inflation. Interest rates have risen from just over 3% in January to just over 7% as of this past week. The increase in the monthly mortgage payment is causing buyers to do a double take when they look at their finances.   

We have solutions. Did you know that you can purchase a 2/1 buy down? By paying just over 2% of your loan value, you can reduce your rate by 2 points the first year and 1 point the second year. The hope is that this would buy you time for the rates to drop to more affordable levels and allow you to refinance in the near future. 

Call for more information or a more thorough explanation of your buying or selling options.