The Real Estate Market Today is not Like 2008-Here's Why
If you have seen any of the recent headlines in regard to the real estate market you may have seen a lot of conflicting information. Most likely you probably heard that the market conditions are shifting. Some headlines may be talking about a coming housing bubble or house prices and values dropping. This may have some people concerned that we are headed for another housing market crash as we saw in 2008.
Here are a few reasons why the current real estate market is not like that of 2008
There is a short supply of homes
Looking at the real estate market in 2008 there were far too many homes for sale as compared to those buyers interested in purchasing them. This caused prices to fall dramatically and for a deep shift to a buyers' market.
Currently, the supply of homes for sale has increased just since the beginning of the year but there is still a significant inventory shortage of homes available for sale as compared to interested buyers. Many contribute this to almost 15 years of a shortage in new construction.
The National Association of Realtors shares a lot of housing market data. Their current numbers show that today we have just a 3.2-month supply of housing inventory. A balanced market is considered to have a six-month supply. In the year 2008, there was about a 10-month supply of homes available.
Mortgage standards were not as tight in 2008
A large contributing factor to the housing crisis almost a decade and a half ago was that almost anybody was given a mortgage loan that was interested in purchasing a home. A large number of banks were creating demand by lowering lending standards and making it easy for almost anyone to qualify for a home loan.
Because of these practices, many laws have been put into place to make sure that lenders are not giving out money to potential buyers unable to pay back a loan. They have cut down on the possibility of what is considered predatory lending practices. Today banks are responsible for making sure they do the work of looking into a borrower's personal finances to ensure they have the capability of paying back the loan.
The number of foreclosures is far lower than that of 2008
Another difference between the market conditions today and those in 2008 is the difference in the number of homeowners facing foreclosure. In fact, foreclosure activity has been much lower since the housing market crash of 2008. Many attribute this to the tightened loan standards and qualified borrowers' ability to pay back their loans.
In addition to tighter loan practices is the fact that a large number of today's homeowners are what is considered equity rich. This means that they have as much or more equity in their home as they owe to pay off their home. This is in a large part due to the appreciation of home prices over the last couple of years.
It can be concerning that the market could be headed for a setback. But the best thing to do is to look at the current data to help you decipher what is truly going on in the real estate market. Right now data shows that we are still on solid and healthy ground as far as the market goes.
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