There has been a lot of uncertainty about the housing market as we head into 2019. I hear comments from people about the concern that we are heading into another housing crash similar to the one ten years ago. The housing market is different than it was ten years ago.
There are fewer foreclosures now than in 2006. There will always be foreclosures but they spiked over 100% before the crash. In 2006 there were 541,540 new foreclosures compared with 216,280 in the first three quarters of 2018 according to the New York Fed.
Many homeowners have much more equity in their homes. Between 2001-2006 many homeowners pulled much of their equity out of their homes by doing cash out refinances. When the number of foreclosures rose and prices fell, many homeowners found themselves in a negative equity position – meaning their homes were worth less than their mortgage amounts. At that point, many homeowners just walked away from their homes which led to more foreclosures. Today many homeowners have over 50% equity in their homes. People are not taking the equity out of their homes like they were in the early 2000’s.
Lending standards are tougher now. In the early 2000’s there were many mortgage types that do not exist any more. There were no income, no job and no assets types of loans – you could get a mortgage based solely on your credit score. Those loans are gone. ARMS (adjustable rate mortgages) still exist but not near as many as there were ten years ago. Many that use ARM’s now are doing 5, 7 or 10 year ARM’s – meaning they are fixed rates for the first few years. Mortgage standards have loosened a bit in the last few years, but we are no where near the standards from the early 2000’s.
We may be heading into rough waters in 2019 with higher interest rates and possibly higher home prices, the market is still in much better shape than it was ten years ago! We know interest rates will increase, but if you are thinking about buying a home, it’s still a great time!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
