3 reasons why this market is nothing like 2008. Should you wait any longer?

3 reasons why this market is nothing like 2008... Should you wait any longer?

People who lived through the 2008 housing crash may be watching this cooling market and looking for similarities. Home buyers who were not affected by 2008 may be concerned the past could repeat itself and they don't want to play that game. They plan to wait and get in at the bottom. However, experts agree, this market is not likely to shake out the same as 2008.

Here is why today's market is very different from 20 years ago.

Lending Got Tight

In the early/mid-2000's lending was not as it is today. Nearly 15 years ago the deregulation of banks caught up to us. Years of banks lending to riskier and riskier borrowers in the early/mid-2000's caused the collapse of the financial system in 2008.

In 2010, the Dodd-Frank Act aimed to prevent risk by increasing oversight in the industry. This has forced lenders to be stricter about their lending practices with the goal to keep risky borrowers from obtaining loans.

The median credit score in the second quarter of 2022 was 773 for newly originated mortgages. 65% of new mortgage holders had a score of 760 or more, according to the Federal Reserve Bank of New York.

Homeowners are in great shape

In 2010, delinquency rates on single-family homes hit a 30 year high of 11.36%. In the first quarter of 2022 it was 2.13%.

The pandemic could have been a disaster for many homeowners who had no choice but to default. Fortunately, mortgage forbearance programs help homeowners pause payments. By the end of June, loans 90 plus days later were 0.5%, a historic low.

Home equity remains high with an estimated $2.8 trillion which is an increase of 34% or $207,000 from a year ago.

Supply of homes is slowly growing

The past few years have seen a lot of demand and limited supply. Not much has changed when it comes to new homes being built. The U.S. is still 5 million units short of where it needs to be. In the first part of 2022 most homes had multiple offers and buyers who did not buy a home in the first part of the year are still in the market, but only a bit more patient. 2008 saw a huge glut of homes at a single time with a large amount of foreclosures hitting the market at the same time. Too much supply drove prices even further. There is still a big demand today, but a slow supply coming to the market.

Any drop in value happens for a reason, but hardly happens for a long time in real estate. Real estate is an asset you can live in, insure and physically touch. Since 1960 the average yearly return on real estate is 6%. Not only does long term holding create wealth it is an asset you use everyday.

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