Why Today’s Housing Market Is Not About To Crash

Why Today’s Housing Market Is Not About To Crash




There’s been some concern lately that the housing market is headed for a crash. And given some of the affordability challenges in the housing market, along with a lot of recession talk in the media, it’s easy enough to understand why that worry has come up.

But the data clearly shows today’s market is very different than it was before the housing crash in 2008. Rest assured, this isn’t a repeat of what happened back then. Here’s why.

It’s Harder To Get a Loan Now

It was much easier to get a home loan during the lead-up to the 2008 housing crisis than it is today. Back then, banks had different lending standards, 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.

Things are different today as purchasers face increasingly higher standards from mortgage companies. The graph below uses data from the Mortgage Bankers Association (MBA) to show this difference. The lower the number, the harder it is to get a mortgage. The higher the number, the easier it is.

Unemployment Recovered Faster This Time

While the pandemic caused unemployment to spike over the last couple of years, the jobless rate has already recovered back to pre-pandemic levels (see the blue line in the graph below). Things were different during the Great Recession as a large number of people stayed unemployed for a much longer period of time (see the red in the graph below):

Here’s how the quick job recovery this time helps the housing market. Because so many people are employed today, there’s less risk of homeowners facing hardship and defaulting on their loans. This helps put today’s housing market on stronger footing and reduces the risk of more foreclosures coming onto the market.

There Are Far Fewer Homes for Sale Today

There were also too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Today, there’s 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) and the Federal Reserve to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just a 2.6-months’ supply. There just isn’t enough inventory on the market for home prices to come crashing down like they did in 2008.

Equity Levels Are Near Record Highs

That low inventory of homes for sale helped keep upward pressure on home prices over the course of the pandemic. As a result, homeowners today have near-record amounts of equity (see graph below):

And, that equity puts them in a much stronger position compared to the Great Recession. Molly Boesel, Principal Economist at CoreLogic, explains

Most homeowners are well positioned to weather a shallow recession. More than a decade of home price increases has given homeowners record amounts of equity, which protects them from foreclosure should they fall behind on their mortgage payments.”

Bottom Line

The graphs above should ease any fears you may have that today’s housing market is headed for a crash. The most current data clearly shows that today’s market is nothing like it was last time.

22 Properties
Page 1 of 2
$740,000
Neighborhood: Whispering Hills
4
Beds
2F11/2
Baths
3,288
Sq.Ft.
1987
Year Built
2
Days on Site
20240041826
MLS
$45,000
Neighborhood: Kaiser Gardens
2
Beds
1
Baths
652
Sq.Ft.
1938
Year Built
4
Days on Site
20240041664
MLS
$115,000
Neighborhood: Sawyers Keego Harbor Sub
0.18
Acres
4
Days on Site
20240041864
MLS
$280,000
Neighborhood: Grenal # 01
3
Beds
1F11/2
Baths
1,075
Sq.Ft.
1965
Year Built
5
Days on Site
20240041205
MLS
$229,900
Neighborhood: Scotts Addition
3
Beds
2
Baths
1,380
Sq.Ft.
1950
Year Built
7
Days on Site
20240039338
MLS
$309,900
Neighborhood: Ingleside Farms Sub
3
Beds
2
Baths
1,800
Sq.Ft.
1953
Year Built
7
Days on Site
58050144881
MLS
$229,900
Neighborhood: Plum Hollow Estates No 1
3
Beds
1
Baths
1,116
Sq.Ft.
1964
Year Built
8
Days on Site
20240040314
MLS
$330,000
Neighborhood: Coachwood Square # 03
3
Beds
2F11/2
Baths
1,484
Sq.Ft.
1990
Year Built
12
Days on Site
20240039141
MLS
2
Beds
1F11/2
Baths
1,550
Sq.Ft.
14
Days on Site
81024027766
MLS
$325,000
Neighborhood: Warren Park Sub
3
Beds
2
Baths
1,474
Sq.Ft.
1989
Year Built
18
Days on Site
58050143756
MLS
4
Beds
3F11/2
Baths
2,108
Sq.Ft.
1999
Year Built
19
Days on Site
20240036267
MLS
$275,000
Neighborhood: Moulin Rouge Sub No 2
3
Beds
1F11/2
Baths
1,191
Sq.Ft.
1958
Year Built
20
Days on Site
20240036323
MLS

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