This is a huge topic these days. I hear people say they are waiting for home prices to come down, the market is going to crash, etc. Everyone is remembering 2008, however today’s market is nothing like it was in 2008. No one knows for sure, but the data doesn’t support a crash like we had in 2008.
Back in 2008 the mortgage standards were less strict than they are now. I have been a loan officer for over 30 years and my description of the industry is “when I started, there were rules and common sense, then it seemed to change to no rules, not sure you had to breath to buy a home, and now it’s rules again but less common sense!” In the early 2000’s, there were many mortgages that aren’t available now. We had loans that didn’t require a down payment, there were many programs that if you had a certain credit score, you didn’t need to document income, etc. Those are gone. Tightening lending standards has helped prevent a situation like we had in 2008.
Foreclosure volume has declined a lot since 2008. Even as foreclosures tick up slightly, the total number is still very low. This chart shows the number of foreclosures over the past few years.
Another reason we don’t expect a housing crash is the inventory. The supply of homes today is much lower than it was in the past. In most areas there is a still a shortage of homes available for sale. According to the National Association of Realtors, the unsold inventory sits at about 2.7 months supply. This is significantly lower than it was in 2008. Many homeowners have much more equity in their homes than they did in the past.
Interest rates have definitely increased over the past year but they were artificially low for a long time. We have never seen rates as low as they were in 2021. Current interest rates are still lower than the long term average but as I say frequently, we are spoiled! Everyone wants that 3-4% interest rate and more than likely we will never see that again.
For those thinking about buying, it is a great time – home prices are expected to slowly increase, interest rates may continue to drop and many of us are offering a lower cost refinance if you buy now. So knowing that, it makes sense to buy if you are thinking about it. Corelogic expects home prices to increase about 3% by the end of this year. Knowing that we should still see some appreciation this year, it’s better to get in now and know you can always refinance if interest rates do decrease!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
