Oops! Today’s Market Didn’t Crash and How It Is Nothing Like 2008

Liza DiMarco June 7, 2023

With all the headlines and talk in the media about the shift in the housing market, you might be thinking we are in a housing bubble. It’s only natural for those thoughts to creep in that make you feel we may repeat what took place in 2008. But the good news is concrete data suggests why this is nothing like the last time, despite the prediction that home prices were due to drop the last quarter of 2022.

There is a Shortage of Homes on the Market Today, Not a Surplus

For historical context, there were too many homes for sale during the housing crisis in the late 2000’s (many of which were short sales and foreclosures), and that is what caused prices to fall dramatically. Due to the lack of homes on the market we are seeing continued price appreciation. In fact, in many parts of the country active inventory is still at record lows. Some opinions of why we have found a shortage of homes can be due to millennials aging into homebuying years, more strict lending guidelines, and even somewhat of a slow down on new construction.
Due to this shortage of homes we have found ourselves succumbed to a near doubling of monthly mortgage rates. In fact, the summer of 2019 we saw a Midwest suburban home on average tax rates and 10% down priced at $160,000 and $1,000 a month for the mortgage. In the current market, we can see that same home with the same tax rates and down payment elevated to $240,000 asking price and $2,000 monthly mortgage rate. This is a 100% increase in less than 4 years!
The graph below uses data from the National Association of REALTORS® (NAR) to show how the months supply of homes available now compares to the crash. Today, unsold inventory sits at just a 3.2-month supply at the current sales pace, which is significantly low. To put it plainly, there just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience a slight decline.

Mortgage Standards Were Much More Relaxed Back Then

During the lead-up to the housing crisis the lending guidelines were a lot less strict than it is today. Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home.
Back then, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from mortgage companies.
The graph below uses Mortgage Credit Availability Index (MCAI) data from the Mortgage Bankers Association (MBA) to help tell this story. In that index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is. In the latest report, the index fell by 5.4%, indicating standards are tightening.
This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards over the past 14 years have helped prevent a scenario that would lead to a wave of foreclosures similar to last time.

The Foreclosure Volume Is Nothing Like It Was During the Crash

Another difference is the number of homeowners that were facing foreclosure after the housing bubble burst in 2008. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM Data Solutions to help paint the picture of how different lending guidelines are this time.
Homeowners today have options they just didn’t have in the housing crisis when so many people owed more on their mortgages than their homes were worth. Today, many homeowners are equity rich. That equity comes, in large part, from the way home prices have appreciated over time. According to CoreLogic:
“The total average equity per borrower has now reached almost $300,000, the highest in the data series.”
Rick Sharga, Executive VP of Market Intelligence at ATTOM Data, explains the impact this has:
“Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. . . . We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”
This goes to show homeowners are in a completely different position this time. For those facing challenges today, many have the option to use their equity to sell their house and avoid the foreclosure process.

Bottom Line

“If you’re concerned we’re making the same mistakes that led to the housing crash of 2008, the graphs above should help alleviate your fears. Concrete data and expert insights clearly show why this housing market is nothing like last time.
Additionally, Savannah has a very strong attraction to a diverse group of people due to her amazing growth. The new Hyundai SuperSite, Port Expansion, Doubling of the Convention Center, New Enmark Arena, and other developments are huge draws and have certainly put Savannah on the map of top places to live! The economy is very strong throughout Savannah. From where I sit, Savannah is a very strong investment opportunity with much more growth to come.”

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