3 Reasons Why We Are Not Heading Toward Another Housing Crash
With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.
Here are three key metrics that will explain why:
- Home Prices
- Mortgage Standards
- Foreclosure Rates
HOME PRICES
A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.
Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.
MORTGAGE STANDARDS
Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,
“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
Last month, their January Housing Credit Availability Index revealed:
“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”
FORECLOSURE INVENTORY
Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:
“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”
Bottom Line
After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.
3 Reasons Why We Are Not Heading Toward Another Housing Crash
With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.
Here are three key metrics that will explain why:
- Home Prices
- Mortgage Standards
- Foreclosure Rates
HOME PRICES
A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.
Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.
MORTGAGE STANDARDS
Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,
“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
Last month, their January Housing Credit Availability Index revealed:
“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”
FORECLOSURE INVENTORY
Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:
“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”
Bottom Line
After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.
The Role of Access in Selling Your House
The Role of Access in Selling Your House Once you’ve made the decision to sell your house and have hired a real estate agent to help, they’ll ask how much access to your home you want to give potential buyers. Your answer matters more now than it did in recent years....
What’s Ahead for Home Prices in 2023
What’s Ahead for Home Prices in 2023 Over the past year, home prices have been a widely debated topic. Some have said we’ll see a massive drop in prices and that this could be a repeat of 2008 – which hasn’t happened. Others have forecasted a real estate market that...
Here’s Why the Housing Market Isn’t Going To Crash
Here’s Why the Housing Market Isn’t Going To Crash Buy or Sell with Marty Gale "Its The Experience" Principal Broker and Owner of Utah Realty™ Licensed Since 1986 CERTIFIED LUXURY HOME MARKETING SPECIALIST (CLHM) PSA (Pricing Strategy Advisor) General Contractor 2000...
Balancing Your Wants and Needs as a Homebuyer This Spring
Balancing Your Wants and Needs as a Homebuyer This Spring Though there are more homes for sale now than there were at this time last year, there’s still an undersupply with fewer houses available than in more normal, pre-pandemic years. The Monthly Housing Market...
An Expert Gives You Clarity in Today’s Housing Market
An Expert Gives You Clarity in Today’s Housing Market The housing market has been going through shifts lately. That’s why it’s so important to work with an industry professional who can be your guide throughout the process. A real estate expert uses their knowledge of...
Certified Divorce Specialist
4 Tips for Making Your Best Offer on a Home
4 Tips for Making Your Best Offer on a Home Are you planning to buy a home this spring? Though things are more balanced than they were at the height of the pandemic, it’s still a sellers’ market. So, when you find the home you want to buy, remember these four tips to...
2 Things Sellers Need To Know This Spring
2 Things Sellers Need To Know This Spring A lot has changed over the past year, and you might be wondering what’s in store for the spring housing market. If you’re planning to sell your house this season, here’s what real estate experts are saying you should keep in...
Could a Multigenerational Home Be the Right Fit for You?
Could a Multigenerational Home Be the Right Fit for You? During the pandemic, many of us reexamined the meaning of home for ourselves and our loved ones. Today, that can be seen in the recent rise in multigenerational households. According to Jessica Lautz, Deputy...
Is It Really Better To Rent Than To Own a Home Right Now?
Is It Really Better To Rent Than To Own a Home Right Now? You may have seen reports in the news recently saying it’s better to rent right now than it is to own your home. But before you let that impact your decisions, you should understand what these claims are based...