"This isn't 2008..." Are we lying to ourselves.
The common refrain from pundits is that the current explosive growth rate in home values in America is nothing like the Great Recession, followed by a list of ways that this time will be different. Today we look at some of those claims.
"Lending standards are much tighter." Yes, this is true, standards are much tighter than the "nothing" they were before. However, this is more akin to my 5-year-old saying they cleaned their room when all they did was move one sock. While "no-doc-loans" are touted as being a thing of the past, the truth is they still exist. While credit scores are higher, the metrics by which credit scores are calculated have been loosened.
"2008 was drive by speculation." This is very true. Starting in 2006 massive speculation began, flooding the market with higher interest in homes, and a flood of renovations. This is why the massive uptick in renovations starting in late 2020 should be concerning.
"This is about demographics." This is the oddest reply. In 2025 the median Baby Boomer will die. That is to say, in the next 4 years, the largest wave of real estate that the world has ever known will reach its crest. How is the United States preparing for this coming oversupply? By building homes on every spare inch of earth they can.
In terms of the count down to The Great Recession: Part Deux, we're not in 2008 or 2007. The problem is not imminent. We are still fully in the preparation phase, and sadly, we're preparing to repeat our mistake by 1) not regulating the banking industry appropriately, 2) not planning for who will occupy all of these homes in 4 years.