Real estate headlines are eerily sounding like it is 2006 again but experts say there is very little to fear about a real estate crash happening soon.
Many people who experienced the 2006 crash of the real estate market are wary of the signs that it is about to happen again. According to Barron's Asia, there are similarities in the behavior of the market then and now. For one, people are paying incredible amounts of money for commercial real estate and what experts call trophy homes.
In February, the Waldorf-Astoria in New York was sold for almost $2 billion which is the record amount paid for a standalone hotel. In Chicago, the Willis Tower was sold for $1.3 billion which also broke the record for the biggest sale of an office building outside New York. Moody's and Real Capital Analytics monitors prices of commercial property in major U.S. markets and they reported that current rates exceed the previous highest mark recorded by 30 percent.
It was also reported that 37 homes in various cities like Miami, New York, and Los Angeles have been sold for at least $30 million in the last 15 months which is 14 higher than the time of the 2006 real estate crash.
In a report by CNBC, many people are saying that the housing market bubble forming today is far worse than the one the world witnessed 10 years ago. The reason according to pundits is that housing is more expensive today compared to then and the price increase is not a product of consumer demand but by low supply or lack of construction projects, very low interest, and influx of foreign buyers who purchase in cash.
Housing analyst Mark Hanson said, "In the days of 'anything goes,' ninja financing caused housing prices to lurch higher, which forced people to rush in and buy, which in turn pushed prices higher, thus increasing volume more, and so on. But when it comes to the new-era, end-user buyer, that can't happen any longer, as buyers actually have to fundamentally 'qualify' for the mortgage for which they apply."