Those who fail to learn from history are doomed to repeat it. That statement has never been more pronounced than describing the last dozen years in real estate. We went from yearly double-digit appreciation and no hassle loan qualifications for everybody that wanted to buy a home, to plunging home prices and lenders making loan qualifying very unpleasant and unobtainable for most consumers. Just as the housing boom was unsustainable, so shall be the housing downturn. Hopefully we will see neither of these polar opposites again.
The Past: Timing is everything in real estate. When we hear about those outrageously low home prices our parents and grandparents paid for their homes back in the day, the word envious comes to mind. During the 70’s, interest rates went as high as 18% during the latter part of that decade. The 80’s and 90’s had a few down years, but on average had a two to three percent yearly appreciation. Those two decades had a fluxiation in mortgage rates, but other than the first five years of the 80’s, rates stayed in single digits. Time Magazine called the first ten years of the new century, the decade from hell. Home values rose at an alarming rate from 2000 through 2006 and then took a nose-dive.
The Present: Stability in the housing market is what we are thriving for now. After years of foreclosures, short sales and diminished home prices, the worse is over. Many communities are still being encumbered by bank-owned homes and those pesky short sales. The lowest mortgage rates in history have helped stabilize the market and been a guiding force behind the demand from prospective home buyers. Traditional homeowners are still competing against distressed properties. Buyers are out in mass, competing against each other for well priced homes.
The Future: Interest rates will slowly increase as our economy improves. Employment will play a big part in how quickly the market progresses. The progression will lead to a more traditional standard of home appreciation of 2% a year. Lenders will still demand good credit scores and some source of a reasonable down payment. The inventory of homes will stay low, as homeowners attempt to recoup some of the value that was lost. The goal of all involved should be to learn from the past and create an environment that will wipe-out those indiscretions that caused the boom and the downturn that followed. Please visit my website www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home and easy access to view local area homes for sale, including pre foreclosures in Davis, California.