Newsletter - May 2014
Just the mere thought of 2008 makes you cringe, right? That fateful year altered the trajectory of so many of our lives. So if I say that there are signs popping up THIS year that look an awful lot like the ones we ignored in 2008, I know I've got your attention.
I recently read an article on HousingWire by Lynn Effinger (read the full article here) that raised some really interesting points on that exact subject. Now, it's important that I say I'm not sounding alarm bells here. 2014 won't be 2008 all over again. But there are some striking similarities you should be aware of:
1. Home Prices Rising. Middle Class Income Not So Much
Effinger points to an article from the Real Estate Daily News (read it here) that reports median single-family home values rose in 119 out of 164 metro areas in the fourth quarter of 2013 and 26% of those increases were in the double digits. On the surface, obviously, this is great news. Yay, recovery! However, when you consider that according to the Census Bureau the median household income level has remained at the same level since 2008, you start to see the makings of a problem. If houses become too expensive for the average American to afford, the recovery is going to slow down in a hurry.
2. Recovery Driven by Investors, Not Homeowners
When the bottom fell out of the mortgage industry, suddenly real estate became incredibly affordable if you already had the money to pay for it. Seizing the opportunity, investors began snapping up properties with the intention of either renting or flipping them. Good for them. Problem is: they often paid above market value for these properties in order to secure them. This led to falsely inflated home values (sound familiar?).
3. 40% of Mortgages are FHA Loans
Speaking of inflated home values, Effinger identifies the government's tinkering as a potential source of over-inflation. In an effort to curb irresponsible lending, the government implemented stricter restrictions for banks. This pushed a lot more buyers into FHA loans. But essentially, many of these loans are still being given to those who simply can't yet afford to buy a house. And we all know how that worked out last time.
The points above don't make it into many news broadcasts, so I wanted to share it with you. Again, no alarms bells from me, but this is information you should know and be prepared for if we see another setback like 2008. Make sure you have your vendors lined up for your data acquisition and document retrieval needs. We are nationwide and here to help! If you haven't tried out Blue Streak Docs yet, try us out and get your 5th order FREE!