McFly’s Paradox: ’80s, ’08, Or Now?!

Hello everyone. We’ve been bustling with content this October and have noticed a lot of chatter about the current state of the real estate market. So, we’re going to talk about it. We’ve gathered info from various sources, including analyses by Bank of America, to shed some light on the market. We’ll look at how the current landscape compares with previous periods, especially the 1980s. Let’s do this.

A Blast From The Past: The 1980s

Before discussing today’s market, let’s think back to the 80s. During this era:

• High inflation dominated
• The Fed raised interest rates
• Baby Boomers were the main buyers

The 1980s was a unique time for real estate. It’s a decade that feels surprisingly similar to today, albeit with some key differences.

A Different Kind Of Market

When discussing today’s real estate, it’s easy to draw parallels with the 2008 crisis. However, this isn’t quite 2008. Here’s how:

• Subprime lending is less common
• Adjustable-rate mortgages are a small fraction
• Homebuilders are cautious about overbuilding

While no one can predict the future, the market today has its own set of challenges and opportunities.

Also Read: Could A Balanced Local Market Be Coming In The Near Future?

Homebuilders Have Been Cautious Not To Overbuild Like In 2008

The Debt Situation

One of the most talked-about topics is the level of mortgage debt. A glance at the numbers reveals:

• Lower mortgage debt to income ratio now
• Lower loan-to-value ratios today
• Less financial stress on homeowners

These factors suggest that current homeowners are generally less burdened by debt compared to the past, particularly 2008.

The Buyer Demographics

So, who’s buying homes now? Interestingly, the buyer demographics have shifted.

• Millennials are the new key players
• Favorable demographics like in the ’80s
• Higher median family incomes today

Just like Baby Boomers were pivotal in the 1980s, Millennials are stepping into their prime home-buying years now.

Affordability: The Real Story

There’s a lot of talk about homes being less affordable today. But what do the numbers say?

• 40% of income spent on homes in the 1980s
• 30% of income spent now

Yes, prices have gone up, but so have incomes. Proportionally, people are spending less of their income on homes now than they did in the 1980s.

Also Read: Home Prices No Longer Homebuyers’ Top Affordability Concern

40% Of Income Went To Home Ownership In The ’80s As Opposed To 30% In 2023

To Recession? Or Not To Recession?

There’s a divide in opinions on whether we’re headed for a recession. Here’s what to consider:

• Interest rates might come down in a recession
• Recessions are generally short-lived
• Real estate often remains resilient

While recessions bring challenges, they also present opportunities, especially in long-term investments like real estate.

At The End Of The Day

Real estate, like life, is cyclical. The question is, will you be a spectator or a participant? At Williams Luxury Homes, we help you navigate these cycles and live life fully. Considering purchasing real estate in Arizona? If so, we provide ‘A Luxury Experience For Everyone’. No matter what the market does.