Why Our Current Market is Nothing Like 2008
We've heard people both concerned and hopeful that we're heading toward a real estate market crash. I mean, are people in houses they can't afford with inflation? Are people upside-down in their homes?
Well, we're here to reassure you that the market we're experiencing now is nothing like the market leading up to the crash of 2008. And there are several reasons why.
Stricter Lending Requirements
According to Realtor.com, in the early 2000's "In the early 2000s, it wasn’t exactly hard to snag a home mortgage. Real estate experts liked to joke that their dogs could have gotten loans."
But a lot has changed since then - especially when it comes to requirements to qualify for a mortgage. Lenders don't want to take on as much risk and much higher credit scores are typically required. And those subprime loans that came back to hurt millions of homeowners have largely been eradicated from the market.
The Board of Governors of the Federal Reserve System is also finding that home buyers are not maxing themselves out as much as they were in the early 2000's. When looking at mortgage payments compared to disposable income, that DTI is much lower than we saw leading up to 2008.
Market Correction vs. Crash
I think we can all agree that the market we experienced in 2020 & 2021 was not "normal," so while we are seeing some price reductions and homes are taking longer to sell - that's not an indicator that the market is "crashing," but is rather a correction in response to the frenzy that the real estate market was a couple of years ago.
Mark Zandi, chief economist at Moody’s Analytics said, "The market is now correcting. … Over time, affordability will be restored and the market will find its footing.”
Shortage of Homes for Sale
Looking back at the early 2000's, there were way more homes on the market than there were buyers to buy them. If you've heard anything about the market now - that's definitely not the case! Many homeowners are choosing to hang on to their homes because of the high interest rates so most sellers are those who HAVE to sell, meaning there are much fewer homes on the market. In many price ranges and areas, we are still seeing multiple offers and buyers still having to be competitive to win a home. Though not as competitive as they had to be back in 2021.
Still have questions?
If you still have questions about what makes this market different than the market of the early 2000's, we're happy to answer them for you! Just give us a call or send us an email.