Contact Us Now! Ask Us Anything
480-470-8505 Call Us Today

3 Reasons Why We're Not Heading Toward Another Housing Crash

Dated: 02/21/2019

Views: 106

With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.

Here are three key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates

HOME PRICES

A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.

Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.


MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Last month, their January Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

FORECLOSURE INVENTORY

Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:

“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”

Bottom Line

After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.

Blog author image

Curtis Johnson

Curtis is a Best Selling Author, the Founder and CEO of The Curtis Johnson Team Powered By eXp Realty, where he runs a dynamic Real Estate Team having sold 5,000 residential homes. The Wall Street Jou....

Latest Blog Posts

This is Not 2008 All Over Again

Some are afraid the real estate market may be looking a lot like it did prior to the housing crash in 2008. One of the factors they’re pointing at is the availability of mortgage money. Recent

Read More

Buyer Demand Growing Everywhere

Buyers are out in full force this fall, increasing the demand for homebuying in all four regions of the country.According to the latest ShowingTime Showing Index,“Home showing activity

Read More

Homeownership Rates Remain on the Rise

In the third quarter of 2019, the U.S. homeownership rate rose again, signaling another strong indicator of the current housing market.The U.S. Census Bureau announced,“The

Read More

75 Years of VA Home Loan Benefits

Today, on Veterans Day, we salute those who have served our country in war or peace, and we thank them for their sacrifice.This year marks the 75th anniversary of VA Home Loan Benefit offerings

Read More