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.
What To Expect as Appraisal Gaps Grow
What To Expect as Appraisal Gaps GrowIn today’s real estate market, low inventory and high demand are driving up home prices. As many as 54% of homes are getting offers over the listing price, based on the latest Realtors Confidence Index from the National Association...
Save Time and Effort by Selling with the Right Agent
Save Time and Effort by Selling with the Right AgentSelling a house is a time-consuming process – especially if you decide to do it on your own, known as a For Sale By Owner (FSBO). From conducting market research to reviewing legal documents, handling negotiations,...
Tips for Today’s Sellers
Tips for Today's Sellers Even in today's ultimate sellers' market, it's key to have an expert guide when you sell your house. Let's connect to optimize your home sale this summer.
Don’t Wait To Sell Your House
Don’t Wait To Sell Your HouseWe’re in the ultimate sellers’ market right now. If you’re a homeowner thinking about selling, you have a huge advantage in today’s housing market. High buyer demand paired with very few houses for sale makes this the optimal time to sell...
Today’s mortgage rates are still incredibly low compared to the historical norm. Let’s connect so you can strike while the iron is hot.
There's Still Time To Take Advantage of Historically Low Mortgage RatesToday's...
Why You May Want To Cash in on Your Second Home
Why You May Want To Cash in on Your Second HomeWhen stay-at-home mandates were enforced last year, many households realized their homes didn’t really fulfill their new lifestyle needs. An office (in some cases two), a media room, space for children to learn, a gym,...
Buying a Home Is Still Affordable
Buying a Home Is Still AffordableThe last year has put emphasis on the importance of one’s home. As a result, some renters are making the jump into homeownership while some homeowners are re-evaluating their current house and considering a move to one that better fits...
3 Things To Prioritize When Selling Your House
3 Things To Prioritize When Selling Your HouseToday’s housing market is full of unprecedented opportunities. High buyer demand paired with record-low housing inventory is creating the ultimate sellers’ market, which means it’s a fantastic time to sell your house....
Why Is This Spring a Great Time to Sell Your House?
Why Is This Spring a Great Time to Sell Your House?
Your House Could Be the Oasis in an Inventory Desert
Your House Could Be the Oasis in an Inventory DesertHomebuyers are flooding the housing market right now to take advantage of record-low mortgage rates. Many have a sense of urgency to find a home soon since experts forecast a steady rise in both rates and home prices...