Pompano Beach Real Estate values have appreciated by about 6% in 2020, and are forecast to appreciate by almost another 6% in 2021 according to Zillow.
Some mighty think that we are in another Housing Bubble just like we saw in 2008.
However, we at Pompano Beach Realty believe the opposite to be true.
We outline 3 reasons why the Pompano Beach Real Estate market is totally different this time around.
1. The Housing supply is extremely limited
As you surely know, Real Estate Prices are determined by supply and demand. When there is a high supply of Pompano Beach Real Estate Sellers wanting to sell and there is low demand from buyers looking t purchase, Real Estate prices in Pompano Beach an elsewhere usually decrease.
And the opposite seems to hold true when there are few properties for sale and many buyers are looking to swoop up Real Estate in Pompano Beach, home prices tend to increase.
Supply and demand in the Real Estate world are measured in months supply of inventory.
A “normal’ number of months of real estate inventory is around 6 months.
If the supply is longer than 6 months, usually indicates a buyers’ market in which home prices tend to decrease and again the opposite seems to hold true for a supply less than 6 months. This indicates a sellers market with rising property prices.
The 2 years leading up to the housing bubble of 2008 the housing inventory increased from around 5 months to 11 months!
According to the NAR (National Association of Realtors) unsold inventory is at an all time low of just under 2 months!
2. The current Housing demand is real!
Leading up to the housing bubble of 2008, the mortgage industry lent money to almost anyone that had a job, regardless of their income or debt to income ratio! Stated income loans made it possible. With these loans the borrower could “state” how much money he/she makes without verification by the lenders, hence the name stated income loans.
The higher the Mortgage Credit Availability Index (MCAI), published by the Mortgage Bankers Association, the simpler it is to obtain a mortgage.
And again the opposite holds true when the MCAI is lower, the harder it is a to obtain a mortgage.
Just before 2006, a little more than 2 years leading up to the 2008 housing crash, the MCAI was at around 400. Then in 2006 it hit an all time high of 868!
As we write this article, the MCAI is at only 122.5
In 2021 the Pompano Beach Real Estate demand is real thanks to the Millennials who are currently the largest generation in the USA.
As many Millennials have come of age to settle down and have families, a major driver for homeownership the demand for Real Estate is real!
This, together with historically low mortgage rates, drives the demand for homeownership even more, making the demand real.
3. As opposed to 2008, in 2020 homeowners have plenty of equity
Leading up to the 2008 housing crash, homeowners were using their homes like ATM machines, by doing cash-out-refinances leveraging the equity in their homes leaving many homeowners with little or no equity in their homes.
As the 2008 Real Estate Bubble began to burst and home prices started their decline many homeowners found themselves with a mortgage balance that was higher than the value of their homes.
Many homeowners started defaulting on their mortgage loans, the begin of a wave of foreclosures.
Fast-forward to 2017 – 2020 and the volume of those cash-out refinances were less than one third compared to what it was 3 years leading up to the 2008 real estate market crash.
In 2020 the levels of equity in owner occupied homes is unprecedented and over 38% of those own their homes without a mortgage loan.
What does that mean?
Since housing supply is historically low and demand remains high combined with the vast equity homeowners have in their homes, they should be able to weather a decline in home prices should there be one.
Is this like the 2008 crash?
Not at all, but exactly the opposite seems to hold true.
If you are looking to purchase a home or condo in Pompano Beach, call a friendly and knowledgeable Realtor at Pompano Beach Realty at 954-505-6000
Start your Pompano Beach Real Estate Search here.
This article is not investment advice and merely represents our opinion of the current Real Estate Market in Pompano Beach.
Please do your own research before investing or buying real estate.
Another interesting article: Things to know about the as-is contract
Published: Feb 15, 2021