Those of us who were in the real estate industry in 2008 when the music stopped in that crazy game of musical chairs we seemed to be playing never want to see that scenario repeated.
It was frightening.
Our incomes plummeted, we had to reduce staffs, great employees left the business (many never to return), real estate lawyers dipped into their retirement and other savings to keep afloat. Real estate lawyers switched to other practice areas. I recently asked a lawyer of retirement age about his plans. His response was that he has no plans to retire because he is still making up the income lost in the crash.
Our business is crazy again.
We hear of houses routinely closing at above listing price in South Carolina. I read a national statistic that suggested more than 40% of houses are going to contract at more than the listing price. Leading up to 2008, I can vividly remember being amazed that contracts on houses were being sold, sometimes more than once, before a closing could take place. We spent lots of time figuring out whether “flips” were illegal based on their facts. I am a member of a female lawyer page on Facebook, and someone posed the question yesterday asking how other lawyers are closing these multiple-contract transactions.
Why are we here now? Inventory is low. Builders are unable to keep up with the demand created, in part, by the angst of staying at home during COVID leading to appetites for better living space. Many have left cities for areas of less population, and, as always, the sunny South sees a constant influx of those looking for better weather. Mortgage rates are low. The economy is good. These factors are converging and generally keeping everyone in the industry hopping.
Will the bubble burst again?
I have read everything I can find on what the experts are saying on this topic, and it appears that most economic and housing experts believe we are in much better shape this time around. The main protection appears to be responsible lending. Leading up to 2008, it seemed that anyone who could hold a pen could get a mortgage. It now appears that loans are being made to more credit-worthy borrowers with decent down payments.
We will see a softening in the market at some point. Mortgage rates will rise resulting in less affordability in the market, and mortgage applications will decline. But that kind of cyclical activity is normal. Our business is accustomed to handling those typical economic and seasonal cycles. Everyone will probably welcome a break in the activity.
I hope and sincerely believe the experts are calling this situation correctly, so hold on for the ride and look forward to the break.