BREVARD COUNTY REAL ESTATE MARKET WATCH: 3 Reasons We’re Definitely Not in a Housing Bubble

By  //  February 24, 2021

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Home values on Florida’s Space Coast appreciated by about ten percent in 2020

WATCH: Bobby Freeman, a lifetime resident of Brevard County, has been a top Realtor in the Space Coast area for more than two decades.

BREVARD COUNTY, FLORIDA – Home values on Florida’s Space Coast appreciated by about ten percent in 2020, and they’re forecast to appreciate by about five percent this year.

This has some voicing concern that we may be in another housing bubble like the one we experienced a little over a decade ago.

Here are three reasons why this market is totally different:

1. This time, the housing supply is extremely limited

The price of any market item is determined by supply and demand. If supply is low and demand is high, prices naturally increase.

In real estate, supply and demand are measured in “months’ supply of inventory,” which is based on the number of current homes for sale compared to the number of buyers in the market.

The normal monthly supply of inventory for the market is about 6 months. Anything above that defines a buyers’ market, indicating prices will soften. Anything below that defines a sellers’ market in which prices normally appreciate.

Between 2006 and 2008, the months’ supply of inventory increased from 5 months to 11 months. The months’ supply was over 7 months in twenty-seven of those thirty-six months, yet home values continued to rise.

In Brevard, the months’ inventory for single-family homes and condos has been under 5 months for the last 3 years, under 4 of the last fourteen months, under 3 for the last six months, and currently stands at 1.6 months – a historic low.

Remember, if supply is low and demand is high, prices naturally increase.

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REAL ESTATE MARKET WATCH: What Record-Low Brevard Housing Inventory Means for You

2. This time, housing demand is real

During the housing boom in the mid-2000s, we had “irrational exuberance.” The definition of the term is, “unfounded market optimism that lacks a real foundation of fundamental valuation, but instead rests on psychological factors.”

Without considering historic market trends, people got caught up in the frenzy and bought houses based on an unrealistic belief that housing values would continue to escalate.

The mortgage industry fed into this craziness by making mortgage money available to just about anyone, as shown in the Mortgage Credit Availability Index (MCAI) published by the Mortgage Bankers Association.

The higher the index, the easier it is to get a mortgage; the lower the index, the more difficult it is to obtain one. Prior to the housing boom, the index stood just below 400.

In 2006, the index hit an all-time high of over 868. Again, just about anyone could get a mortgage. Today, the index stands at 122.5, which is well below even the pre-boom level.

In the current real estate market, demand is real, not fabricated. Millennials, the largest generation in the country, have come of age to marry and have children, which are two major drivers for homeownership.

The health crisis is also challenging every household to redefine the meaning of “home” and to re-evaluate whether their current home meets that new definition.

This desire to own, coupled with historically low mortgage rates, makes purchasing a home today a strong, sound financial decision. Therefore, today’s demand is very real.

Remember, if supply is low and demand is high, prices naturally increase.

3. This time, households have plenty of equity

Again, during the housing boom, it wasn’t just purchasers who got caught up in the frenzy. Existing homeowners started using their homes like ATM machines.

There was a wave of cash-out refinances, which enabled homeowners to leverage the equity in their homes. From 2005 through 2007, Americans pulled out $824 billion dollars in equity.

That left many homeowners with little or no equity in their homes at a critical time. As prices began to drop, some homeowners found themselves in a negative equity situation where the mortgage was higher than the value of their home.

Many defaulted on their payments, which led to an avalanche of foreclosures.

Today, the banks and the American people have shown they learned a valuable lesson from the housing crisis a little over a decade ago. Cash-out refinance volume over the last three years was less than a third of what it was compared to the three years leading up to the crash.

This conservative approach has created levels of equity never seen before. Current data studies show that 56.7% of all homes in this country have a minimum of 50% equity.

That’s significantly better than the equity situation in 2008.

Bottom Line: This time, the housing supply is at a historic low. Demand is real and rightly motivated. Even if there were to be a drop in prices, homeowners have enough equity to be able to weather a dip in home values. This is nothing like 2008. In fact, it’s the exact opposite.

ABOUT THE AUTHOR

Freeman, Jennifer McCoy and Nikki McCoy-Freeman are family owners of the McCoy-Freeman Real Estate Group on Florida’s Space Coast. Together they have more than 40 years of extensive experience in all aspects of the real estate industry, have sold over $420 million and are ranked in the top 1% of all Florida Realtors.

Bobby Freeman, a lifetime resident of Brevard County, has been a top Realtor in the area for over two decades. In his first year as an agent, Freeman received a Rising Star award from his Brokers. Since then he has achieved numerous sales awards from some of the largest real estate firms in the world.

Freeman, Jennifer McCoy and Nikki McCoy-Freeman are family owners of the McCoy-Freeman Real Estate Group on Florida’s Space Coast. Together they have more than 40 years of extensive experience in all aspects of the real estate industry, have sold over $420 million and are ranked in the top 1% of all Florida Realtors.

Among McCoy-Freeman Group’s achievements are Certified Luxury Home Marketing Specialist (CLHMS), Certified Distressed Property Experts (CDPE), Accredited Buyer’s Representative (ABR) and voted Best Realtor in Brevard County. The group has been featured in many news publications including CNN Money Magazine, CNNMoney.com, WFTV 9 News, News 13, WKMG News 6, Coastal Condo Living Magazine, Hot Retirement Towns Magazine, and SpaceCoastDaily.com.

For more information log on to BrevardRealtyConnection.com

TO SEE CONDO LISTINGS LOG ON TO CocoaBeachCondoGallery.com

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