3 Ways Today’s Housing Market is Not Like the One Before the Crash
With home prices and mortgage rates rising, many people may be wondering if a crash is ahead.
It’s a natural question. After all, the last housing crash is still fresh in many people’s minds. Millions of Americans lost their jobs. Even more lost homes. It was an event no one wants to see repeated.
While we’d love to say another crash is 100% off the table, there’s no way to predict the future. What we can do, though, is compare today’s housing market to that of the pre-crisis one. And when we do that, a much healthier picture emerges.
Are you worried another housing bubble could burst? Here are three ways today’s housing market is not like the one before the crash:
1. Mortgage standards are tighter.
In the years prior to the housing crash, many mortgage lenders were approving borrowers who probably shouldn’t have been able to get a loan. When millions lost their jobs in the recession, they found themselves unable to make their payments. This led to defaulting on their loans and, eventually, foreclosure.
Today, mortgages come with much stricter requirements. That’s not to say it’s hard, but lenders assess borrowers more carefully now. They check credit scores, verify employment, and look at your bank accounts and assets. They only lend to borrowers they know can handle their payments despite what life may throw at them.
2. Supply and demand are in line.
Before the crash, supply and demand levels were off-kilter. More homes were for sale than there was a demand for, which caused prices to drop pretty steeply.
In today’s market, things couldn’t be more different. For-sale inventory is near all-time lows, and buyer demand has been extremely strong for years. Even as prices rise, high demand persists — particularly from Millennials (now the largest group of homebuyers, according to the National Association of Realtors).
3. Homeowners have more equity.
A lack of equity also hurt Americans in the crash. Many were taking out home equity loans and actually owned very little of their properties. When home values dropped, they ended up owing more on the homes than they were worth.
Right now, homeowners have more equity than ever (the average gain was $55,300 just last year!). Unless home values dropped a very significant amount, most could sell their homes and still make a healthy profit.
Talk to a mortgage pro
Still worried we may be heading for a crash? Get in touch with a mortgage expert at Embrace Home Loans in your area. They can talk you through current market conditions and your options for buying or refinancing a home.