Why Today’s Housing Market is NOT Like 2008
With all of the headlines and talk in the media about shifts in the housing market, you may be thinking we are heading back in the direction of the 2008 housing market crisis. After all, it’s only natural for thoughts to emerge about the devastating financial and economic collapse that cost many ordinary people their jobs, life savings, homes, or all three.
Continue reading to learn how our current market differs from the collapse of 2008.
What Happened in 2008?
Simply put, the market crashed in 2008 because too many people had taken on loans they couldn’t afford. Easy credit and rising home prices resulted in a speculative real estate bubble.
However, this is not the only culprit, as issues that caused the market to crash began years earlier.
In the late 90s, the Federal National Mortgage Association, also known as Fannie Mae, began its movement to make home loans accessible to borrowers with lower credit scores. Fannie Mae wanted everyone to attain the American dream of homeownership — regardless of their credit score. The relaxed lending standards
allowed high-risk borrowers to obtain mortgages
with unconventional terms. This ultimately fueled the housing growth and corresponding rise in home values.
While housing prices continued to increase, the rising subprime mortgage market thrived. The build-up of bad debt resulted in a series of government bailouts, after which the housing bubble was ready to burst.
Effects of the 2008 Market Crash
After the market crash, the economy continued to suffer and entered a period known as “The Great Recession
.” Hundreds of thousands of Americans lost their jobs, and the unemployment rate peaked at 10 percent
. Additionally, the housing slowdown caused home prices to decline. Homeowners found themselves “upside down” on their mortgage — meaning they owed more money than their home was worth. Many lost their homes to foreclosure due to job losses and increasing mortgage payments
Where Does the Market Stand Today?
Currently, as a result of strong demand for homes and lean supply, the market is tilted decisively in favor of sellers. In simpler terms, the supply of homes is at an all-time low, and demand is at an all-time high.
However, in today’s market, buyers finally have some room to negotiate
with the seller, not only for the price of the home but also the mortgage itself to make it more affordable. So, if you’re considering buying a home in this market, act quickly, as this won’t be true forever.
It’s important to realize that we are not experiencing the same conditions as in 2008, and our market isn’t crashing. Adam Workman, regional vice president at Cross Country Mortgage, stated, “We’re not worried about the current market at all, we’re actually excited for it, as buyers can negotiate for the first time in years.”
Main Differences From Today’s Market vs. 2008
When the housing market crashed in 2008, millions of Americans watched their homes plunge in value or lost their home to foreclosure. However, the current slowdown is nothing like the last one, and there is no need to panic. We’re experiencing a “rebalancing” due to rising rates — meaning people who can afford houses at the current borrowing rates are benefiting from a more balanced housing market that’s defined by increased housing supply and less buyer demand.
With that being said, we see a few main differences between today’s market and the crash of 2008. For example, we aren’t going to see a massive wave of foreclosures or experience any significant change with jobs in general, and more importantly, more buyers are entering the market.
“We don’t foresee any real way to draw a parallel between the two time periods, or any significant downturn coming in the housing market,” said Workman.
Enter the Market With an Expert Agent by Your Side
All that to say, today’s market is not what we experienced in 2008. Though home prices
are rising, the underlying drivers of the current housing market are different from the mid-2000s crisis.
You can leave your worries behind when you choose to work with an expert Redbud Group REALTORS® to buy or sell your home! After all, our agents are equipped with all the necessary tools and market knowledge to streamline your real estate journey. Click the button below to Connect with our team
and get one step closer to achieving your real estate goals!