Cromford Market Updated -September 2020 📈

Dated: September 30 2020

Views: 22

We can see why many people will be thinking 2020 looks a lot like 2004/2005 with the CMI suddenly rising to over 300. We certainly agree that annual appreciation is likely to rise sharply over the next 6 months reaching well over 20%.

However, there is no sign at the moment that the CMI will crash back to below 100, as it did in 2005/2006. It is currently struggling to inch higher but while supply remains tight and demand strong, the status quo will likely continue.

There are dozens of things that are different now compared with 2005, but the most significant include:

1. In 2005, thousands of homes were being purchased and left vacant as they were snapped up by speculators

2. In 2005, rents were low and headed lower because there were more homes than people who wanted to live in them

3. In 2005, almost anyone could get a 100% loan with minimal documentation, and thus had no skin in the game if prices were to fall (as they did)

4. In 2005, few people thought the market could decline

5. Mortgage fraud was rampant creating artificial demand

6. The developers had built (and would continue to build through 2007) more homes than were demanded by the population growth

For all 6 of these, the opposite condition exists today.

1. Vacancies are very low

2. Rents are high and rising sharply

3. Qualifying for a mortgage requires financial resources (for example, a job) and must be supported by documentation, and almost all homeowners have equity

4. Many people think the market could go down, supported by articles claiming this is likely (although it is not)

5. Mortgage fraud is at a relatively low level

6. The developers have built fewer homes than demanded by population growth between 2008 and 2020.

It is not normal for the CMI to be above 200, never mind 300, so it will certainly come down from its current level eventually. However, this is more likely to be as a result of much higher prices damping down demand, rather than a flood of supply entering the market. We would need to see almost three times the current level of supply to get back to normal.

Blog author image

Josh Marquez

We aim to serve our clients by providing our team members and agents with the highest technological platforms available in our industry to bring positive result and the best experience in the process ....

Latest Blog Posts

How to Prepare for a Bidding War [INFOGRAPHIC]

How to Prepare for a Bidding War [INFOGRAPHIC]Some HighlightsWith so few houses available on the market today, being ready for a bidding war is essential for prospective homebuyers.From pre-approval

Read More

The #1 Reason Not to Wait to List Your House 🏡 for Sale

Many industries have been devastated by the economic shutdown caused by the COVID-19 virus. Real estate is not one of them.Mark Fleming, Chief Economist for First American,

Read More

Thinking of Moving? 💭 [INFOGRAPHIC]

Some HighlightsIf you’re ready to sell your house but you’re worried about finding one to move into, why not invest in a brand-new home built just for you?New construction is on the

Read More

Selling Your Home? 💰 These Are The Upgrades Buyers Are Looking For During COVID-19

COVID-19 has changed the real estate landscape in many ways—including shifting buyer priorities.But what, exactly, are buyers looking for in today’s market?A recent article from

Read More