Some are attempting to compare the current housing market to the market leading up to the “boom and bust” that we experienced a decade ago. They look at price appreciation and conclude that we are on a similar trajectory, speeding toward another housing crisis.

However, there is a major difference between the two markets. Last decade, while demand was being artificially created by extremely loose lending standards, a tremendous amount of inventory was coming to the market to satisfy that demand. Below is a graph of the inventory of homes available for sale leading up to the 2008 crash.

A normal market should have approximately 6 months supply of housing inventory. As we can see, that number jumped to over 11 months supply leading up to the housing crisis. When questionable mortgage practices ceased, and demand dried up, there was a glut of inventory on the market which caused prices to drop as there was too much supply and not enough demand.

Today is radically different!

There are those who believe that low mortgage rates have created an artificial demand in the current market. They fear that if mortgage rates continue to rise, some of the current demand will dry up (which is a possibility).

However, if we look at supply again, we can see that the current supply of homes is well below the norm of 6 months.

Bottom Line

We will not have a glut of inventory like we did back in 2008 and home values won’t come tumbling down. Instead, if demand weakens, we will return to a normal market (approximately a 6-month supply) with historic levels of appreciation (3.6% annually).

Real estate is a tricky business with a lot of ins and outs that can be difficult to navigate. Getting informed is the key to battling information overload and fatigue. We wanted to know more about what first-time investors should consider when looking for properties to put money into.

I want to share some information and tips I have learned through the years working in the real estate industry, consider this advice if you're in the market for your first property investment.

Investors need to reexamine the "Why?" of their first investment. Who is your target demographic and what are their limitations? If you are improving for the purpose of renting, choose a simpler and replaceable finish. If you are buying to resell, look at what is working best in the neighborhood where you sell and use it as a guide.

Take your time and really understand the market. You don't have to buy near your location, but you do need a trusted advisor that is local. Be careful, and don't blindly trust the numbers. 

Always establish the amount of money that you are willing to pay before looking and deciding on the best place to buy. Sticking to a budget is key for an investment, and it can be easy to get carried away with emotional or aesthetic attachments when looking at homes or picking out details for the renovations. If possible, when choosing an investment, select somewhere near where you live so that you can easily keep an eye out and work on the property. You will also be very in tune with what is happening in the neighborhood and local property trends.