5 Reasons This Isn’t a Repeat of the 2008 Housing Crash:
Many homeowners are still haunted by the 2008 housing crash when property values collapsed and foreclosures spiked.
Are their fears well-founded?
“It’s a valid question,” Lawrence Yun, chief economist for the National Association of REALTORS® offered assurance that current dynamics are nothing like during the Great Recession. He pointed to several key indicators of how this market differs.
- The labor market remains strong. In the last major housing downturn, there were 8 million job losses in a single year. Now there are virtually none. Though layoffs in the technology and mortgage industries are occurring, they haven’t accumulated enough to form a net job loss, Yun noted. A strong job market bodes well for housing’s future.
- Less risky loans. the subprime loans that were prevalent during the 2008 housing bust are basically nonexistent today.
- Underbuilding and inventory shortages. New-home construction prior to the 2008 crash was amounting to 7.65 million units annually. Today, it’s 4.6 million. Yun points to “a massive housing shortage” from a decade of underproduction in the housing market.
- Delinquency lows. About 10% of all mortgage borrowers were delinquent on their loans in the previous housing bust. The mortgage delinquency rate is now at 3.6%, holding at historical lows.
- Ultra-low foreclosure rates. Homes in foreclosure reached a rate of 4.6% during the last housing crash as homeowners who saw their property values plunge walked away from their loans. Today, the percentage of homes in foreclosure is 0.6%—also at historical lows. He predicted foreclosures to remain at historical lows in 2023.
Overall, the fundamentals don’t point to a housing market that is operating similarly to the 2008 cycle, Yun said. While home sales are slowing, prices remain up nearly 6% as of October sales numbers compared to a year ago. Also, inventory remains low, which will keep home prices elevated, Yun said. “The chance of a price crash is very small due to the lack of supply.”
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