Top Reasons Today’s Market Is Different from the 2008 Housing Crisis
In this day and age, do not believe everything you read. For example, there are some, either with muddy crystal balls, or a desire to attract eyeballs via clickbait, warning that the real estate market is on the verge of a 2008-style implosion. Before you start looking for a convenient ledge for jumping, understand that 2023 is ENTIRELY DIFFERENT than 2008, and its leadup.
For starters, a re-creation of the 2008 credit crunch, and real estate implosion would require significant numbers of subprime mortgages (loans offered to buyers with poor credit). Banks suffered along with people that defaulted on loans back then, and they’ve since cleaned up their acts. It was only two decades ago that virtually the only thing required to have banks throwing money at people looking to “buy” a home was a pulse.
Today, well, suffice to say that prospective buyers should be gainfully employed, and have their financials in order before they start hunting. Subprime loans are virtually nonexistent today…
Which leads into today’s job market. Still very strong and looking up moving forward. Last go-around, millions and millions of jobs went POOF in twelve months. In today’s labor market, we’re not seeing job loss like that at all. Yes, you may read about the tech and mortgage businesses taking some hits, but there’s been nowhere near the accumulation required to form a net job loss.
So, steady as she goes…
Two decades ago, we were dealing with an oversupply of new homes. More recently, it’s been the opposite. An undersupply. The sting of 2008 put an end to many developers and builders, which has led to less inventory, and price increases. This trend is expected to be ongoing for the foreseeable future.
Lastly, in 2008 we were mired in the F-word. Foreclosures. So many homeowners had to walk away from their loans as home prices collapsed. In 2023, the percentage of homes in foreclosure remains at historical lows—around 0.6%.
At the NAR Real Estate Forecast Summit two months ago, NAR Chief Economist Lawrence Yun highlighted four major reasons why home prices are expected to remain steady, and foreclosures to remain low throughout 2023…
Job Market
During the last recession, 8 million jobs were lost in just one year. However, in the current labor market, there hasn’t been a lot of job losses. While layoffs in the technology and mortgage industries have been making headlines, there has not been enough of an accumulation to form a net job loss, according to Yun.
Subprime Mortgages
Back in 2008, subprime loans were quite common. The abundance of subprime loans—loans offered to buyers with poor credit—contributed to the housing bust. Yet in today’s market, subprime loans are nearly nonexistent.
Nationwide Housing Shortage
In today’s market, only 4.6 million new homes are being constructed. For the past decade, the housing market has experienced a severe lack of inventory, due in part to underproduction in the new-home sector. Low inventory levels have led to increases in home prices, a trend that is expected to continue for a while.
Foreclosures
During the last housing crash, many homeowners had to walk away from their loans as home prices collapsed. In today’s housing market, the percentage of homes in foreclosure remains at historical lows—around 0.6%. What’s more, Yun predicts foreclosures to remain near these historical lows for the remainder of 2023.
Separating fact from fiction is as much Karen’s job as helping clients buy and sell homes. If you have more questions, and you want to meet with Karen, she’s happy to do so! Contact her today.
