2019 SFV HOMEOWNERS - SELL NOW OR HOLD YOUR PEACE
The end is nigh for sellers. The days of multiple offers are gone. Like the rush hour madness of the 405 freeway, all things must come to an end. 2019 is the last year where you can reasonably expect a high price for your house.
We are NOT Having a Crash
But first - we're not having a crash. The housing market is still healthy. The most important evidence is how loans are written. Ever since 2008, the federal government has made the loan approval process difficult. At the time of this writing, I am trying to buy a condo. My loan just got denied - and I'm a Realtor!
We used to have stated-income loans. As the name suggests, buyers would walk in to a bank, state their income without evidence, and receive a loan. In essence, people who made minimum wage were purchasing homes that were out of their purchasing power. People who made $3,000/mo took on mortgages for $4,000/mo.
At the most basic level, this is what led to the housing crisis. The severity of the crash is not a normal part of the economic cycle. Yes, we've seen brief market corrections every 10-15 years, but nowhere near the upheaval of the 2008 crash. The most similar in terms of measured impact was the Great Depression itself.
The recent surge in home prices is normal. Our prices are still distinctly lower than pre-recession levels, adjusted for inflation. In order to purchase a house, the mortgage loan approval process is rigorous. It's a gauntlet of paranoia on the part of the lenders. Below are some examples. Though they're not hard and fast, these are the general guidelines:
Have two years of income at the same or similar job
Self-reported income prefers 5 years of history
FICO Credit Score preferably above 640. If joint purchase, two
Down payment must be seasoned, or in your account for a minimum of two months
Everyone who has bought a house in the past 4 years can afford it. They are capable of making payments and are at low risk of default. This why we won't have a crash. In order to buy a median house right now, buyers must show a strong history of making a 6-figure income. This leads us to our next point.
The Market Has To Come Down
There's a finite number of people who are:
6-figure income earners
Want a house
Don't already own or are unsatisfied with their current house
As we can see by the meteoric rise in price and the subsequent leveling off of house prices, they have mostly bought. As soon as the economy recovered in the last 5 years, consumer confidence soared. Buyers wary from the recession pounced on all the cheap inventory.
With the median income of the Valley floating around $50,000, we were due to run out of buyers. There are still some left, but that number is decreasing.
All that's left are procrastinators or new buyers that are entering the market. That's not a lot to be excited about if you're a seller.
For the next 3 years, we'll see a gradual decline in home prices. This is a market correction of about 5-10%. In a sense, lowering prices will open the market to buyers who were not competitive before. Buyers who lost bidding wars will be able purchase again. The picky ones who missed the initial wave have also been sobered by renting another year.
Nonetheless, the emotional craze of the last few years is gone. Buyers used to be punished severely for offering low. Sellers wouldn't even respond to those offers. Now, they'll be rewarded. As news spreads that sellers are taking lower offers, it'll only compound.
Everyone wants a deal. Can you blame them? Similarly, all sellers want top dollar, which is why we're here again at these ridiculous prices.
Homeowners, It's Time to Sell
This article is ultimately for sellers that have been on the fence. Whether you're retiring or hate your neighborhood - it's time to sell. Do you want to make $600,000 this summer, or $550,000 the next one?
This isn't a hit piece on procrastinators for us to get more business. Alright, maybe it is. But we have your best interest at heart. If you're like the rest of us, you've been in awe at how high prices have been. You've wondered when they're coming down.