Housing Crash Coming? History Says No
With rising inflation and the Federal Reserve increasing interest rates, many are left asking, Are we going to see a market crash like we saw in 2008?
The Answer: No, it’s unlikely.
“The southeast Florida housing market is one of the hottest and most sought-after areas to own real estate in the country. The rise in interest rates will decrease the purchasing power of prospective home buyers, but when it comes to home prices, we will see more of a leveling off compared to what we saw over a decade ago,” said Carlos A. Melendez, President of Broward, Palm Beaches & St. Lucie Realtors®.
What’s the difference between our current housing market compared to 2008? One thing that’s different is homeowners today have a record breaking amount of equity in their homes and have less debt due on mortgages.
Record Number of First Time Home Buyers The demand for housing is at an all time high. There are 18 percent more prospective homebuyers between the ages of 25 to 34 than there were in 2006. That is a total of 6.6 million more homebuyers exploring the market. As rent prices keep increasing, buyer competition will rise since one of the best ways to fight inflation is to invest in real estate.
Mortgage Loans Aren’t as Attainable One of the major issues with the housing market crash of 2008 was how easily people were able to get mortgage loans. Home loans were given to many unqualified buyers including borrowers who had bad credit scores and had low or no savings. Today, the underwriting process is more detailed and complex.
For context, there are currently 2.5 million adjustable-rate mortgages, which represents about 8 percent of active mortgages. Before the crash of 2008, there were 13.1 million adjustable-rate mortgages, representing 36 percent of all mortgages
Fewer Borrowers Are Behind on Their Payments More thorough qualifications from lenders and underwriters have led to lower mortgage delinquencies. In 2008, borrowers were defaulting on their loans in unprecedented numbers, which eventually led to the decay in our country’s financial markets and started a recession. Currently, mortgage delinquencies are just below 3 percent.
Questions? If you have questions about the current housing market conditions and whether it's a good time for you to purchase a home, contact a local Realtor® today.
Source: Florida Realtors®