Housing prices have been on a pretty meteoric rise over the past couple of years. Low inventory coupled with low interest rates plus high consumer demand put lots of upward pressure on prices. Bidding wars became the norm.
But, then came inflation…and, now, higher interest rates. What does this mean for housing prices? Are we in a bubble that is getting ready to burst?
Luckily, the majority of experts don’t think so. According to a recent survey by the folks at Pulsenomics, sixty-two percent of industry pros think the current housing market has managed to steer clear of a bubble.
Phew.
Their optimism that we are not about to repeat the misery of the housing crash of 2008 was based on a couple of factors.
Limited Inventory
First, today’s housing inventory is still pretty low and is much lower than inventory levels in the mid - 2000s. Lower supply is keeping prices fairly stable despite rising interest rates. As Odeta Kushi, Deputy Chief Economist at First American, explains:
“The fundamentals driving house price growth in the U.S. remain intact. . . . The demand for homes continues to exceed the supply of homes for sale, which is keeping house price growth high.”
Stricter Lending Standards
In the years leading up to the Great Recession of 2008, it was easy to get a mortgage loan without much (if any) documentation or demonstrated income. That led to many borrowers getting in over their heads and ultimately defaulting on their loans. Today’s lending standards are much different. As realtor.com notes, most current lenders are giving mortgages only to the most qualified borrowers.
We Can Help
Of course, here at Navigator Private Capital, we evaluate each deal based on its individual merits. Rather than consider borrower income, we look at the value of the asset itself and, depending on the exit strategy, calculate the project’s LTV, LTC and/or DSCR.
Need help evaluating the viability of your next project? Reach out to talk it over at 888.444.3160 or email us at info@gonavcap.com. To start an application and get access to all of our tools and resources, sign up below.