4 Stats That PROVE This Is NOT 2005 All over Again

    Recent research by the realtor.com examined certain red flags that caused the housing crisis in 2005, and then compared them to today’s real estate market. Today, we want to concentrate on four of those red flags.

    1. Price to Rent Ratio
    2. Price to Income Ratio
    3. Mortgage Transactions
    4. House Flipping

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    All four categories were outside historical norms in 2005. Home prices were way above normal ratios when compared to both rents and incomes at the time.

    They explained that mortgage transactions as a percentage of all home sales were also at a higher percentage:

    “Loose credit was one of the main culprits of the housing crisis. Mortgage lending expanded dramatically as unhealthy housing speculation reached its peak and was met by the highest level of credit availability as measured by the Mortgage Bankers Association. The index measures the overall mortgage credit condition by the share of home sales financed by mortgages. This metric does not capture credit quality, but it does set a view of the importance of financing in supporting the housing market.”

    House flipping was rampant in 2005. As realtor.com’s research points out:

    “Heightened flipping activity is a clear indication of speculation in the real estate market. A property is considered as a speculative flip if the property is sold twice within 12 months and with positive profit. Flipping is a normal part of a healthy housing market. In an inflated housing market, expectations about short-term profit from pure price appreciation are very high; therefore, the level of flipping activity would show evidence of being heightened.”

    Here are the categories with percentages reflecting the unrealistic ratios & numbers of 2005 as compared to the current market. Remember, a negative percentage reflects a positive gain for the market.

    4 Stats That PROVE This Is NOT 2005 All over Again | Keeping Current Matters

    Bottom Line

    They say hindsight is 20/20… Today, experts are keeping a close watch on the potential red flags that went unnoticed in 2005.

     

    Source:  Keeping Current Matters

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    Steve Baker

    Steve comes to the world of real estate with nearly 30 years of Marketing and Graphic Design experience. These two very important skills make him ideal for this profession. In 2017 he achieved his highest accolade to date becoming a global, award-winning real estate graphic design/marketing recipient. Mr. Baker is not only a REALTOR but the Director of Marketing for Rinehart Realty. His education and work experience also include a Bachelor degree in Education and degrees in Radiologic Technology and Medical Ultrasonography. He was a pioneer in the field of Radiology PACS development and Radiology Voice Recognition adoption and implementation in southwest Virginia. His previous positions as Director of Radiology and PACS Administrator lead to enormous development in resources and project management necessary to succeed in the field of real estate. Steve is a writer and developer for a variety of blogs and real estate publications. He recently completed his first book of quotations and is currently working on a Real Estate Marketing book. He is a strong supporter of the United Way, having won a past Campaign Coordinator of the Year award. He is also a strong advocate for breast cancer research and education. Mr. Baker has a history of work experience developed on the foundation of a strong work ethic, the pursuit of excellence, quality, honesty and integrity.

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