The American economic crash of 2006 left the housing industry in shambles. After the market crashed, real estate prices hit rock bottom. As people were laid off from their jobs, they watched the value of their home plummet despite owing hundreds of thousands of dollar. People walked away from their family homes unsure what to do. It sent a wave of panic through the country and left us questioning whose fault it was. Inflated prices in the housing market, poor regulatory constraints on mortgage and money lending, and short-term profit goals led to one of the worst market crashes in US history.
Today, house buyers are skeptical. Real estate is up and running, and the value of homes in increasing again. It’s easy to understand why buyers are so hesitant, but the crash lead to a lot of changes in the industry.
Here is what you need to know:
- The Congress passed the Dodd-Frank act to tighten regulations on the money lending business. This act ensures no one can sanction a loan without proper identification and a thorough background check for loan repaying capacity.
- Market prices are even higher than in 2006. The median sale price of a home was around 236,000. Today, they are about 2% more expensive. However, the economy is in a better position. Unemployment rates are significantly lower, and fewer families are buying new homes. These factors create higher prices, but also lower the risk of another crash.
- The market is almost entirely restored in some areas of the United States. Most city economies are already back to pre-crash status. San Diego, for example, is selling houses above 2006 prices. To ease concerns about stability, we are also experiencing job growth at the rate of 39.4 %, and unemployment rates are well below national average.
- Many markets that have not bounced back yet, show healthy improvements. For example, Austin’s economy saw a 63% increase in its housing prices since 2006. Denver shows a 54% increase.
- Places like Los Vegas, Tuscan, and Riverside, Ca. remain low. They are about 20% below pre-crash levels, but they still see an increase every year. Los Vegas took a particularly hard hit. After the crash, nearly 70% of Nevada’s home mortgages suffered heavily, and the city almost stopped growing in population. However, it’s not an absolute tragedy for these markets. Older homes and houses below $200,000 are still turning good profits.
The markets are recovering fast, and the prices are on a ride again. While some parts of the US are doing better than before, other areas are seeing a slow recovery. However, the tighter set of regulations and lower of unemployment rates stabilize the housing markets across the country.
San Diego is back in the safe zone, but that does not mean you shouldn’t take precautions. You can multiply your annual budget to get a comfortable range for a mortgage. We still recommend that you talk to a financial planner to help you set a safe budget before you purchase a home. When you are ready to look at houses and condos around San Diego, give us a call.