Are we headed into a housing collapse just like 2008? In my opinion, there are five big differences between the 2009 market and today. On this episode, we’re going to talk about some of those main distinctions.
On this episode of Investing in Real Estate, I’m sharing why buying real estate now is still a great strategy, despite a few snags in the economy. We’ll also talk about the state of the housing market, inflation, the US dollar, and much more!
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- Overall today’s housing market is in much better health than it was in 2007 and 2008. This is because banks learned their lesson in 2008. Qualifying for a loan is much harder than it used to be.
- Equity has skyrocketed due to the increase in property prices over the past two years. Some investors are seeing a 20-34% increase in their tappable home equity. This equity is money at their disposal, they are able to borrow against the home equity or implement a cash-out refi
- Negative equity is virtually non-existent today unlike how it was in 2008. Negative equity refers to a homeowner owing more on their mortgage than the property is worth. With the increase in property prices and value, the negative equity catastrophe of 2008 is simply not happening today.
- Homeowners and investors have a much firmer footing with regard to their credit. This came as a fail-safe with the rigorous bank loans. On average in 2008 most borrowers were leveraging with a credit score of around 640, 2020 to present is landing borrowers well above 700 on average.
- One of the biggest differences is the amount of ARMs currently on record. According to CNBC data, the amount of ARMs on record today is about 2.5 million as compared to 2007 with 13.1 million. To make it more clear, in 2007 these adjustable rate mortgages caused about 10 million mortgages to potentially default as the rates reset.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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