I’ve been seeing a lot of posts on Facebook about another housing crash coming. Many people assume there will be a crash just as bad or worse than the last crash we had about 10 years ago. Since the markets are obviously going to crash, they reason, they will wait to buy real estate until prices plummet.
I can understand why people have this attitude, as I would much rather buy houses when they are cheap after a crash than now when prices are high. The problem I have with this viewpoint is that there is no guarantee there will be a housing market crash, and even if there is, how could you know where the bottom hits?
Will there be another housing market crash?
I got my real estate license in 2002 and have been selling houses as well as investing in real estate since then. I worked right through the last crash, flipping houses and selling them for regular clients as well as banks and HUD. I have a lot of firsthand knowledge of the downturn, what happened and how it happened.
Before the housing market crisis from 2008 to 2012, the banks were being foolish. They were making outlandish loans to just about anyone who wanted a house or even two houses. I know an investor in northern Colorado who bought hundreds of new houses using hardly any of his own money. Because there was so much demand, houses were being built rapidly. Many areas of the country saw record amounts of building.
Then the bottom fell out when we realized the banks were creating toxic loans that had a good chance of never being paid back. Lending guidelines changed overnight and builders were left with tons of inventory and no buyers. The crash ensued because there were so many homes for sale and not enough people to buy them.
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This time around, the banks have not been issuing these unwise loans. Lending guidelines are still very strict and while you may hear of some subprime lending going on today, it is a fraction of what was going on before the crash. New construction for single-family homes (download required) still has not returned to its average pace even after years…