How Does Last Year’s Housing Peak Compare to the Peak Pre-2008 Crisis? | Topouzis & Associates, P.C.


April 16, 2019

How Does Last Year’s Housing Peak Compare to the Peak Pre-2008 Crisis?

How Does Last Year’s Housing Peak Compare to the Peak Pre-2008 Crisis?

It’s a truism of the housing market—as with any market—that we will see cycles come and go. Occasionally those cycles see something go fundamentally awry, as in the 2006 peak prior to the housing crisis of 2008,  when house prices rose precipitously before crashing, sometimes losing nearly half of their value. In previous posts we have discussed a number of potential reasons for that crisis, and for the housing bubble that preceded it. And while that traumatic economic event has come and gone, many Americans remain on edge about the potential of another such occurrence. Most recently, over the course of 2017 and into mid-2018 we saw housing prices rise at an accelerated rate, an increase in the number of bidding wars, and fewer low-end homes being filled by first-time home-buyers—particularly in some of the higher-demand housing markets—which led some to wonder aloud: is there another bubble, and thence another housing crisis, in the offing?

Since August 2018, though, we have seen the rise in housing prices begin to diminish and the number of bidding wars have leveled off significantly. It’s too early to say for certain, but the likelihood is that we are seeing the peak of this cycle in its waning days, and may now even be reaching the other side of it. There has been no crash; no house is worth 40 percent less now than it was in July simply because of market forces.

A report released in December 2018 by the Florida Atlantic University College of Business entitled “Where Are We Now with Housing: December 2018” details the similarities between the pre-2008 peak and the recent/current peak (it could still be considered to be ongoing since, after all, prices are still rising—just more slowly), and the differences.

What the data appears to reveal is that, though the market did grow a bit hot recently, the prices have not spiraled nearly as out of control as they did in 2006, nor                is there anything near the same level of downward pressure on housing demand (only 0.039 in December on the Beracha, Hardin & Johnson Buy vs. Rent Index, as compared to a full 1.00 at the end of the last, mid-2000s cycle). It also shows that while housing prices were (as of December) at 7.3 percent above the long-term pricing trend, this is practically nothing compared to the 31 percent above long-term pricing trend they reached at the peak of the mid-2000s cycle.

So long as these number remain modest, and we see only a moderate correction, there’s little likelihood that a new housing crisis is on the horizon.

If you’re looking to take advantage of the present market security to buy that perfect home, we here at Topouzis & Associates, P.C. not only  offer the services that ensure your title gets conveyed clear of defects, we supply purchasers with Owner’s Policies of title insurance. Contact us if you want your property transfer in Cranston, Rhode Island; Springfield, Massachusetts; or Miami, Florida to go through without a hitch—both before and after closing.