You shouldn’t expect to see a crash like the last housing crisis.
Today we’ll talk about a topic that seems to be top of mind for everybody: “Is a repeat of the 2008 crash on the horizon?” Economists are saying that that won’t happen for these three reasons:
1. Lending practices. In the years leading up to the last crash, mortgage companies had very relaxed qualification processes. Almost anyone could get a loan, even without proof of income. Today, buyers must have good credit, stable income history and assets in order to qualify for a loan.
2. Qualified buyers. In 2008, we saw a lot of cash-out refinances. People were using their homes as piggybanks and pulling out money for vacations, cars, etc. When prices shifted downward, people owed more on their home than what it was worth and the loan default rate rose significantly. Today, we have very qualified buyers who can afford to make their payments, have stable jobs and a strong equity position.
3. Housing inventory levels. In 2008, new construction was very abundant and fueled the housing inventory. Since 2008, new construction inventory has decreased every year which is one of the main reasons for today’s housing shortage. Low housing inventory coupled with strong buyer demand has caused price appreciation to skyrocket the last two years.
We hope you found this information helpful. If you have any questions, don’t hesitate to reach out to us by phone or email. We look forward to hearing from you.