Why Today’s Housing Market Isn’t Headed for a Crash
67% of Americans predict a three-year home market meltdown. Given all the media coverage of home market movements, it seems reasonable that so many individuals feel this way. Good news. Today's market is different from 2008's.
Mortgage Standards Were Looser Then.
Home loans were simpler before the housing crisis. Banks created false demand by reducing lending rules and making it simple for anybody to get a house loan or refinancing.
Thus, lending institutions took on more risk in people and mortgage products. Defaults, foreclosures, and price drop followed. Today, mortgage providers have stricter requirements.
This graph utilizes MBA data. This index makes mortgages simpler as it rises. Lower numbers are tougher.
The Crash Reduced Foreclosures.
When the housing bubble broke, more homeowners faced foreclosure. Since the crisis, foreclosures have decreased since purchasers are more qualified and less likely to default. The graph below shows ATTOM data comparing the previous time to now:
Thus, foreclosures remain low while rising. Most analysts don't anticipate foreclosures skyrocketing as they did after the 2008 crisis. Calculated Risk founder Bill McBride shows how a huge surge in foreclosures affected house values back then and why it won't this time.
Saleable Homes Today's Less
During the housing crisis, too many properties were for sale, and many short sales, and foreclosures, drove values down. Since this year, supply has grown, but years of underbuilding houses have left a scarcity of inventory.
The graph below compares the months' supply of houses to the collapse using NAR data. At the current sales rate, unsold inventory is 2.7 months, much lower than last. Even while certain hot areas may see minor decreases, there isn't enough inventory for house prices to plummet as they did last time.
If recent news stories make you scared that another housing market crisis is on the horizon, the above facts help allay some of your concerns. Both the observations of industry professionals and the most recent statistics make it abundantly evident that the present market is in no way comparable to the one that existed before.