Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in the
lovely Upstate of South Carolina I'm
your host Stan McCune as always realtor
here in the greater Greenville area you
can find all of my contact information
in the show notes if you need a realtor
for any possible reason buying a home
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the show if assuming that you enjoy it
today I'm going to be talking about
comparing the current market to what the
market was around the Great Recession
this is something that we're starting to
hear people talking more and more about
this because of how many strange things
are happening and we had talked about
this a little bit in the past but I've
never actually done a deep dive into
really comparing specific to the
Greenville Market I have to clarify even
though this is a broader topic
everything that I discuss in this
podcast is specific to the Greenville
Market because that's where I'm getting
all my data from but even though we
have discussed this a little bit in the
past I have never really dove into
the data of what did it look like in the
months leading up to 2008 what was the
market like what was happening in real
estate in comparison to what is
happening now and people are growing
concerned about this because we're still
seeing this frenzy of a seller Market
we're still seeing tons of chaos prices
going up at unprecedented rates now
we're seeing added in into the mix
mortgage rates going up just also at
basically unprecedented rates I mean
it's insane just like overnight it went
from 32% to basically 5% for a 30-year
conventional loan and so we're seeing
all of these things happening and people
are starting to to say okay I'm
starting to hear these Rumblings of all
right the market can't be pulled in all
these different directions it has to
collapse right it has to collapse under
under the weight of all of this
and we've discussed this before that
there is a misconception that just
because things are getting expensive
just because people are buying real
estate at a at an unprecedented Pace
that does not mean that there's a
bubble a bubble is artificial Demand
right it's it's when sales are happening
artificially when sales are happening
because people actually want to buy
and actually need to buy that is not a
bubble and
particularly when when we're in a
situation like we are now where a over a
quarter of real estate transactions in
Greenville are cash buyers a larger
percentage than ever before are putting
down large down payments 10% 20% and
above that also which we've discussed
in the past is a a big distinction from
back in 2005 through 2007 where people
were doing these no do loans where they
didn't even have to basically prove
their income and zero down and
adjustable rate mortgages that overnight
could go up you know five 6% from where
they were we are not seeing that type
of real estate environment right now
like we were back then but what about
the other indicators right because I've
already talked about all that stuff
before I'm not going to rehash all of
that what are the other indicators in
the market when we you know compare what
is happening today in terms of Supply in
terms of demand in terms of days on
Market all of these various things how
does it compare to what was happening in
the leadup to the Great
Recession now let me start by saying all
of my data on here is based on the
greater Greenville Association of
realtor data
and it's it's imperfect because I
actually kind of have to look at at
graphs that don't tell me the exact
numbers but I can pretty much I these
numbers if they're not exact they're
really close like I might say a th when
the number is actually
980 so on a meta level meta level
these numbers should be pretty close
but let's just start by kind of setting
the stage here the Great Recession
started most people pinpoint December of
2007 as when the Great Recession like
actually started I had no idea I was
in college in December of 2007 I had no
idea I graduated in 2008 I did not know
I was graduating into a recession it's
funny you know that was probably the
worst possible time in the world to like
graduate not the worst time in the world
I'm exaggerating but the worst time in
the past I don't know 30 or 40 years to
graduate and enter the workforce and I
had no idea what I was in for when I
graduated May of 2008 it was quite the
ride but up until that point up until
December of
2007 a lot of people thought that the
market was okay right it didn't seem
like it was teetering it didn't seem
like it was about to collapse people
didn't realize that that there was a
housing bubble that was being
created the closings in Greenville
here's here's how to think about it 2007
closings in Greenville were comparable
to the closings that were in
2014 and 2015 so if you want to think
about the market if you have been
buying and selling or have had an
interest in real estate in Greenville
or really anywhere since 2014 2015
imagine what the market was like then in
terms of how many closings were
happening per year and that's basically
what was happening in 2007 2014 2015 by
that point we were we were pretty much
out of the recession at that point and
that was a that was a healthy Market
there wasn't anything interest rates
were were good there there was
Supply but there was also demand good
Market that was generally speaking
from the standpoint of the number of
closings what 2007 was like
but there were cracks in the system that
now we can look back and see ooh okay
there this was this didn't just come out
of nowhere this should have been seen
people should not have been surprised by
this even though the closings were
comparable to 2014 2015 levels nothing
else was and the housing market was
really hanging by a thread so let's
just take it kind of let's break down
kind of one thing at a time here
so if we look at days on the market
2007 generally speaking the days on
the market for a house this was the the
period of time from when it went on the
market until it went under contract was
typically 80 to 100 days that is a very
very large number we haven't seen a
number that high in quite some time
so even though there were a lot of
closings it was taking a really really
long time for homes to go under contract
3 months basically for for homes
from the time they were listed until
they went under contract that is
oftentimes a massive
indicator that there is too much
Supply and not enough demand a a the
opposite issue of what we have right now
right now we have not enough Supply and
so much demand all right so in 20 7
leading up to the Great Recession there
was indicators that there is a massive
issue of in the reverse of what we
have today of supply and demand right
now our days on Market are averaging
around 20 to 30 so literally like a
third to a fourth of what it was in 2007
so by that indicator we have a
completely different Market a completely
different scenario
than what we have right
now
in terms of let's look at the the
median sales price trend so in terms
of of the median sales price this is
something that you know we try to track
this over time we try to see okay how is
it going are obviously the median sales
price is seasonal we see prices go down
a little bit take a little bit of a dip
in the winter and all that
but they generally just keep going up
that's what appreciation is that why
people like to to purchase real estate
as an investment because in theory that
chart continues to go up that that sales
price that that trend of appreciation
continues to go up and in
2007 basically we we didn't really
see from 2007 to 2008 much of a change
in terms of the trend for the median
sales price here in the Greenville area
until spring of 2009 spring of 2009 is
when we start to see really the the
major concerns happen which is
interesting because that is squarely
over well over a year from when the
recession started but this is not to be
surprising because we've and we've
discussed this before the only way that
prices can go down in in real estate is
if you have just a dramatic over supply
versus demand but even
with what I was just explaining before
that there was a lot of Supply in
comparison to to the demand this prices
were still going up for a variety of
reasons Greenville becoming more
attractive to a lot of people etc
etc inflation of course plays a
factor into that as well but what I
believe is the reason why there was
you know basically a 14 to 15 month lag
from the start of the recession until we
started to really see an impact on
prices going down is because that is
when foreclosures really started to hit
the market and if you look at the the
trend of foreclosures yeah it it
skyrockets it starts to it it started to
go up well before 2007 and this is
one of the the metrics that we can look
at that was very very concerning back
then foreclosures were steadily going up
from 2005 to 2006 to 2007 and then
skyrockets 2008 2009 and 2010 before it
finally starts to resend or whatever
the right word is resend go down it
started to go back down in in
2011 and so what happened was is that
glut of foreclosures that started
happening in 20072 2008 those finally
started to to actually come on the
market in 2009 because if a bank starts
the foreclosure process it it takes a
while for that forclosure process to
actually get to conclusion sorry I
just knocked over a box of tissues it
takes a while for for those foreclosures
to actually get on the market once
they do those foreclosures tend to be
cheaper than the other houses that have
not been foreclosures that have sold in
the area and so that is the the reason
why prices can go down generally
speaking that is what needs to happen we
don't see prices go down they stay flat
in in the worst case scenario typically
in Greenville we see them staying flat
until foreclosures short sales and the
like hit the
market now what are we seeing right now
well foreclosures are at record lows
right now so if we compare this to 20
7 roughly
1% of housing units were in foreclosure
it was actually a little bit more than
1% what we have right now or at least in
2021 was
0.11% that is lower than it than at any
other time the the graph I'm looking at
goes back to 2005 2005 it was
46%
0.11% and this is is not in Greenville
this is the entire housing market okay
so this is not a GG stat this is this
is for the entire us I I don't have
this number for Greenville specifically
but Greenville mirrors the rest of the
US in this way we have seen a steady
steady decline in foreclosures the past
the past few years and that has only
gone dramatically down the past two
years particularly the past two years
we're we're seeing foreclosure rates so
low it's basically
non-existent and so that is a that is
such an an amazing indicator for this
housing market that Trend would have to
reverse dramatically like we would have
to have we would have to have almost
10 times the foreclosures that we have
right now in order to compare to what
it was in 2007
that is that's a huge number and so
what that tells me is that prices are
not going down they are not going to go
down I've said this before but I've got
the data for you guys we would need to
have foreclosures hit an
unprecedented number well actually a
precedented number we would have to have
it hit something greater than 2007
levels very very quickly and then it
would take another probably 15 is months
after that before we would actually see
the market convert into a clear buyer
Market with prices on The Descent
what about inventory we I alluded to
this before when we were talking
about the days on Market but the
inventory the month supply of inventory
in 2007 was in the six to8 month range
so that is what we would consider a
buyer Market and and you know we
typically consider anything greater than
6 months to be a buyer
market and and the total inventory of
houses for a given month was in the
7,000 units range 7,000 units which is
what we use to refer to you know houses
condos Etc 7,000 total how does that
compare to today how that compares to
today is we have 1 to two months of
inventory and total inventory is in the
2,000 units range that is 70% less
inventory than what we had in 2007
leading up to the recession that is
again an incredible number what it would
take for us to be able to get back to to
the kind of inventory we had back then
it would be incredibly difficult
right because a lot of this is spurred
on by new construction new construction
right now is still being hampered by the
pandemic it's still it's being
hampered by government regulation so
we're seeing EV pretty much every area
in the US is becoming stricter on new
construction because people are are like
you know whoa I don't want all this
Farmland converted into a new
subdivision all this Farmland right by
my house I don't want that so people are
complaining things are getting
stricter environmental requirements are
getting strict
and so all of these things are putting
the squeeze on new construction that's
the only way that we can get out of this
inventory crisis of low Supply is by
building more houses but we are in a
situation where we're where we're
building way fewer houses than we need
to and and there would be it would be
really really difficult and I'm I'm
going to get into this here in a minute
really difficult for us to come anywhere
near that inventory range
that we had in 2007 and by the way we
to to get to the 2007 climate we would
need to surpass that 7,000 because the
demand today is higher so in order to to
get to something that resembles what the
climate was in 2007 that inventory
number would have to be even higher than
than the 7,000 a month range and right
now it's sitting pretty at around
2,000 and so let's look at the Demand
right in February February of
2007 there were 750 closings how does
that compar to February of 2022 there
were
1,150 closings this is in according to
greater greater Greenville Association
of Realtors that's a 50% increase 50%
great it's actually greater than 50% of
of 750 you come up with
1150 so what's remarkable about that
is that's that's a 50 % increase despite
the fact that that that level of Supply
is so low right we had Supply levels
in the
2000 range but 1150 closings whereas
in February 2007 Supply was in the 7,000
range but with only 750 closings that is
again it is a completely
incomparable scenario an incomparable
situation when you comp compare the
supply versus the demand in 2007
unbelievable amounts of supply and very
low demand relatively speaking
2022 unbelievably low Supply and
Incredibly high demand so in order for
us to match those 2007 levels really we
need to see somehow Supply go up and
I've already said that's really not
going to happen like we don't I want it
to happen we don't see any I any
scenario where that could happen at
least not in the Greenville area it is
it it would take years of of
deregulation and supply chain to to
repair itself and a bunch of Builders to
become a lot more aggressive and to just
start building building building
everywhere for that to be fixed and
then with regard to demand how is demand
just going to go away how is demand for
housing in the greater Greenville area
just going to disappear it's not it's
not going to disappear the only way
that it disappears is if there is again
some sort of recession that happens but
remember in 2007 that was a unique I've
said this before I'm going to say it
again and I will say it again in the
future 2007 was a housing market crash
so it literally was a real estate
recession we don't know at least I I
don't know what 20072 2008 would have
looked like if it was a comparable
recession but wasn't caused by the
housing market how would the housing
market have been Downstream affected
I don't know because it was a housing
market crash that led to a recession
right now what we would need is for a
recession to then as a byproduct of it
lead to lower demand people able and
willing to buy houses which would then
lead to a market crash but the the
demand would have to go
so it would have to to go down so much
and again it just seems incredibly
unlikely
there are several metrics when we
look at the at the historical data that
point to Greenville shifting from a
buyer Market to a sellers market around
the 2015 to
2016 time period so that's when
that's when we saw really the market
finally you know as as our economy
was really coming out of the recession
and and fully fully healed from from
all of that I guess some people might
argue with me on that but for the
purposes of this podcast I'm going to
say fully healed from the Great
Recession the housing market saw that
flip from a roughly a buyer buyer Market
to a sellers market around 2015 to 2016
so what were inventory levels around
that time inventory levels around that
time were around 4,000 to 5,000 a month
so that was still a sellers market and
they had 200 to
250% of the houses that we have today so
even if we gained inventory on on you
know double what we currently have
double the inventory what we currently
have and if demand was comparable to
what it was in 2015 2016 and it's more
than it was back then but even if even
if demand went down I doubled we would
still be basically in a sell's market
back then they had their closings in
2015
2016 which is really the best metric
I can use for demand was 40% lower so
the supply was double and the demand was
roughly half of what it is now so and
that was still a sellers Market that is
again just insane that is how insane of
the sellers Market is right now to
correct you are looking at a at a
correction that would be historic it
would be unlike anything that we've seen
probably since the Great Depression it
would probably take the only thing I
can come up with in my mind and I'm no
Economist but would be a a crazy War a
Crazy World War III type of scenario
that would cause this this type of
crazy Market
correction comparable to what we saw
in 2007 to 2008 I I I cannot see how
these supply and demand issues can
resolve could could correct in a
dramatic way in any other way so
again to to not even going back to 2007
going back to like 2015
2016 when when the market was healthy
but had just flipped over to a sellers
Market what would it take for us to
get back to to that level so we're
averaging right now around 1,600 new
listings per month and about 1,400 new
contracts per month those numbers are
nuts but that's what that's what
we're averaging to get back to 2015 to
2016 levels of inventory just by the end
of the year we would need listings
which would be the supply part of supply
and demand to stay the same but for the
demand for the the new contracts to
immediately drop immediately like right
now tomorrow drop by 20% and stay there
until the end of the year and if that
happened if we just overnight
immediately saw a 20% drop in demand
which would be unbelievable right that
would be an insane Drop Like higher
interest rates are not going to cause
that I don't care what you say what
people you know how many people are
freaking out oh my goodness you know
mortgage rates have gone way up mortgage
rates are not going going up they
would have I don't know what level have
to go up to in order to cause a 20% drop
in demand but it would have to be again
astronomical maybe like n or
10% something insane like
that that's what that's what it would
take in my opinion for us to have demand
immediately dropped by 20% and then it
would need to to be dropped by 20% for
another 8 to9 months before we would
finally find ourselves with 2015 to 2016
level s of inventory and that is still a
seller Market still a sell Market to
get back to 2007 levels pre- recession
by the end of the year to get back to
those Levels by the end of the year we
would need to see demand drop
immediately by
40% and stay that way for the next nine
months and then for us to see something
similar to what happened then in 2008
the ACT ual Great Recession itself that
it would need to drop even
further now how does how does that
drop how does that 40% drop compare to
the Great Recession at least in
Greenville in Greenville we saw a demand
drop by 30 to
35% so this would what it would take for
us to get to 2007 levels of supply and
demand we would need to see overnight a
greater Market correction than what we
saw in
2007 when the recession actually
happened the end of 2007 and 20 2008
we would need to see a greater Market
correction overnight than what happened
then and that correction would have to
continue for 9 months straight in order
for the market to actually see
something comparable to what we had
during the Great Recession and so this
is why when we had one month of
basically no homes being listed or
sold during when when we had the
lockdown right at the beginning of the
pandemic this is why the housing market
didn't crash because we need nine months
of that we well nine months of of it
being 40% less we need months upon
months upon months stacked together of
really bad numbers of really high Supply
really low demand in order for us to get
anywhere that resembles 2007 from the
standpoint of the housing market and
as I mentioned before foreclosures are
at historically low levels and there's
no reason to think that that won't
continue because up until this point
people have been have been purchasing
with a lot of cash and with low interest
rates now as interest rates go up might
people might that strain the system a
little bit more yes yes it will
0.11% foreclosure rate that's not going
to it's not going to stay there it will
come up but for it to come up to levels
that are that are disconcerning or
disconcerting it would have to be
again tremendously high back in 2016 I
just said that was a sellers Market
2016 it was 7% That's six times
that's greater than six times what what
we had had in 2021 so we have a very
very long leash on this on the
Foreclosure rates and on all of these
other
things so here's my conclusion from this
what we're seeing right now in terms of
the the supply and demand issues this is
not changing I don't care what happens
with interest rates I don't care what
happens with
inflation I don't I don't even care
if we have some kind of a a mini
recession it take a borderline
depression Great Depression type of of
economic climate for the housing market
to truly see a flip to something
resembling a buyer's market I
shouldn't say something resembling a
buyer Market but to something resembling
the the 2008 to to 2012 level of buyers
Market okay we could see we could see
it with I could see it within a few
years flipping to a buyer Market but to
be a market where prices are going down
where we're seeing just home sitting
for a third to half of a year before
they go under contract like what we saw
back in the Great Recession listen
every metric that I'm looking at tells
me we are years away from that barring
some kind of nuclear apocalypse that is
that's the only thing that I could
personally see that would cause that to
happen that said as I've said in
previous podcasts we do have to
monitor this this mortgage rate
situation closely we don't know the
ripples of it but I'm very confident
that one of the ripples will not be
lower prices one of the ripples will not
be a tremendous amount of increased
Supply versus the demand we might see
minor I I do expect as I've said before
price increases to slow down but they
haven't yet I'm telling you right now I
am I'm out there in the market right
now it nothing is slowing down yet
and so at some point it will have to we
have to think that it will but all
the metrics right now point to that this
Market is going to remain crazy for
quite some time buckle up unless we
go to war with Russia or something like
that and Russia like bombs the US God
forbid they do but honestly I think
it would take something insane like that
for us to see something that
resembles what happened in in the 2008
period of time when we entered that
Great Recession and had the housing
market collapse like it did I hope you
guys found that to be informative if you
have any questions please let me know
you can find all my contact information
in the show notes if you need to reach
out to me for any reasons need a realtor
to guide you through a real estate
transaction I'm your guy and as
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appreciate you guys I hope you have a
good rest of the week
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