Why Today’s Housing Market Isn’t Headed for a Crash
67% of Americans say a housing market crash is imminent in the next three years. With all the talk in the media lately about shifts in the housing market, it makes sense why so many people feel this way. But there’s good news. Current data shows today’s market is nothing like it was before the housing crash in 2008.Back Then, Mortgage Standards Were Less StrictDuring the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance an existing one.As a result, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from mortgage companies.The graph below uses data from the Mortgage Bankers Association (MBA) to help tell this story. In this index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is.This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards have helped prevent a situation that could lead to a wave of foreclosures like the last time.Foreclosure Volume Has Declined a Lot Since the CrashAnother difference is the number of homeowners that were facing foreclosure when the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM to show the difference between last time and now:So even as foreclosures tick up, the total number is still very low. And on top of that, most experts don’t expect foreclosures to go up drastically like they did following the crash in 2008. Bill McBride, Founder of Calculated Risk, explains the impact a large increase in foreclosures had on home prices back then – and how that’s unlikely this time.“The bottom line is there will be an increase in foreclosures over the next year (from record level lows), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”The Supply of Homes for Sale Today Is More LimitedFor historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to years of underbuilding homes.The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just 2.7-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines.Bottom LineIf recent headlines have you worried we’re headed for another housing crash, the data above should help ease those fears. Expert insights and the most current data clearly show that today’s market is nothing like it was last time.
What Are Experts Saying About the Fall Housing Market?
The housing market is rapidly changing from the peak frenzy it saw over the past two years. That means you probably have questions about what your best move is if you’re thinking of buying or selling this fall.To help you make a confident decision, lean on the professionals for insights. Here are a few things experts are saying about the fall housing market.Expert Quotes for Fall HomebuyersA recent article from realtor.com:“This fall, a more moderate pace of home selling, more listings to choose from, and softening price growth will provide some breathing room for buyers searching for a home during what is typically the best time to buy a home.”Michael Lane, VP and General Manager, ShowingTime:“Buyers will continue to see less competition for homes and have more time to tour homes they like and consider their options.” Expert Quotes for Fall SellersSelma Hepp, Interim Lead of the Office of the Chief Economist, CoreLogic:“. . . record equity continues to provide fuel for housing demand, particularly if households are relocating to more affordable areas.”Danielle Hale, Chief Economist, realtor.com: “For homeowners deciding whether to make a move this year, remember that listing prices – while lower than a few months ago – remain higher than in prior years, so you’re still likely to find opportunities to cash-in on record-high levels of equity, particularly if you’ve owned your home for a longer period of time.”Bottom LineMortgage rates, home prices, and the supply of homes for sale are top of mind for buyers and sellers today. And if you want the latest information for our area, let’s connect today.
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