.png){kind=small}
For those hoping for a housing market crash to lower home prices, current data suggests otherwise. Experts predict that home prices will continue to rise. The market today is vastly different from before the 2008 crash, particularly regarding loan accessibility.
Pre-2008, banks had lax lending standards, making it easy for almost anyone to secure a home loan. Nowadays, mortgage companies have raised their standards, making it more challenging for homebuyers. The Mortgage Bankers Association's data illustrates this shift, showing a more stringent mortgage environment.
During the peak shown in the graph, lending standards were less strict than they are now. This meant that lending institutions took on much greater risk in both the person and the mortgage products offered around the crash. That led to mass defaults and a flood of foreclosures coming onto the market.
There Are Far Fewer Homes for Sale Today, so Prices Won’t Crash Because there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), that caused home prices to fall dramatically. But today, there’s an inventory shortage – not a surplus.
The graph below uses data from the National Association of Realtors (NAR) and the Federal Reserve to show how the months’ supply of homes available now (shown in blue) compares to the crash (shown in red):
Today, unsold inventory sits at just a 3.0-months’ supply, compared to the peak of 10.4 months' supply in 2008. This scarcity of inventory means there's not enough supply to cause a crash in home prices like before.
People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s Back then, many homeowners were borrowing against their home equity for non-essential purchases, leading to financial strain when prices fell. Today, homeowners are more cautious, with fewer tapping into their equity.
According to Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has reached an all-time high:
Basically, that means homeowners have more equity available than ever before, putting them in a stronger position. According to Black Knight, only 1.1% of mortgage holders ended the year underwater, down from 1.5% last year. With fewer distressed properties on the market, prices are unlikely to fall dramatically. The data suggests today's market is much more stable than in the past.
As always, if you have questions on how your property is performing in today's market, it's important to work with a trusted, knowledgable, experienced agent, and I am always just a phone call/text/email away. Maritza Cortazar, My AZ Homegirl guiding you home from start to keys.