So many unanswered questions during this corona virus, and so many wondering if this is a housing crisis. We are facing a very different challenge: an external health crisis that has caused a pause in much of the economy and a major shutdown worldwide.
Let’s look at five things we know about today’s housing market that were different in 2008.
1. HOME APPRECIATION
As you can see below there’s a big difference between the 6 years prior to the housing crash and the most recent 6-year period of time. Leading up to the crash, we had much higher appreciation in this country than we see today. In fact, the highest level of appreciation most recently is below the lowest level we saw leading up to the crash. Prices have been rising lately, but not at the rate they were climbing back when we had runaway appreciation.
2. THE MORTGAGE CREDIT
The Mortgage Credit Availability Index is a monthly measure by the Mortgage Bankers Association that gauges the level of difficulty to secure a loan. The higher the index, the easier it is to get a loan; the lower the index, the harder. The difference is that today we’re nowhere near the levels seen before the housing crash when it was very easy to get approved for a mortgage. After the crash, however, lending standards tightened and have remained that way leading up to today.
3. CURRENT HOMES FOR SALE (INVENTORY)
One of the causes of the housing crash in 2008 was an oversupply of homes for sale. Today, (see graph) we see a much different picture. We don’t have enough homes on the market for the number of people who want to buy them. Across the country, we have less than 6 months of inventory, this is an under supply of homes available for interested buyers.
4. HOME EQUITY
See below how people are accessing the equity in their homes today as compared to 2008. In 2008, consumers were harvesting equity from their homes (through cash-out refinances) and using it to finance their lifestyles. Today, consumers are treating the equity in their homes much more cautiously.
5. THE EQUITY ON YOUR HOME TODAY
Today, 53.8% of homes across the country have at least 50% equity. In 2008, homeowners walked away when they owed more than what their homes were worth. With the equity homeowners have now, they’re much less likely to walk away from their homes.
The COVID-19 crisis is causing different challenges across the country than the ones we faced in 2008. Back then, we had a housing crisis; today, we face a health crisis. What we know now is that housing is in a much stronger position today than it was in 2008. It is no longer the center of the economic slowdown. Rather, it could be just what helps pull us out of the downturn.
JOLIE POWELL REALTY IS HERE FOR ALL YOUR REAL ESTATE NEEDS….NOW MORE THAN EVER!