‘Rapid Price Increases Will Not Last Forever’
The answer is likely not, according to a recently released realtor.com® report. Building is lacking in many markets—one hallmark 10 years ago was over-construction—and credit standards are more stringent, says Danielle Hale, chief economist of realtor.com.
In 2016, home prices (the national median home sales price) were 2 percent higher than they were in 2006, the report reveals. Pre-recession prices have returned in 31 of the 50 largest metropolitan areas.
In contrast with 2006, however, are today’s credit conditions. Currently, the median FICO score for a mortgage is 734; the median in 2006 was 700.
“Lending standards are critical to the health of the market,” says Hale. “Unlike today, the boom’s under-regulated lending environment allowed borrowing beyond repayable amounts and atypical mortgage products, which pushed up home prices without the backing of income and equity.”
Additionally, economic indicators point elsewhere. Employment was healthy then and is now, but inventory is limited more today—at a 20-year low. Presently, the average months supply is 4.2; in 2007, the average months supply was 6.4.
For more information, please visit www.realtor.com.
Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at email@example.com.