How's the Housing Market?

[Melissa Marney]

With all of the talk in the media about the state of the housing market, it’s easy to hear all of the negative chatter. However, there is good news to be heard, current data shows that today’s housing market is not similar at all to the 2008 recession.

The housing crash that happened in 2008 was largely fueled by buyers’ ability to get a loan. The terms on which a buyer could borrow were much easier than they were today, making those who may have been underqualified appear financially stable enough to purchase. Therefore, banks were writing loans out to parties who may not be able to financially handle the monthly expenses. According to Keeping Current Matters, “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.” With tighter lending standards today, bankers are giving out loans to individuals with much higher qualification levels.

In addition, because of these poor lending practices, many homeowners were near or facing foreclosure. At the time of the actual crash, homeowners could no longer recoup the money they had spent or lent towards their home. Today’s foreclosure rates are much lower than in this time period because of the higher lending qualifications.

The high rate of foreclosures in the 2008 crash caused an influx of distressed sales in the market. At the time, this influx caused too many homes to be on the market, causing prices to drop significantly. Though foreclosures may rise in the next year, we should expect less of a dramatic drop in prices and less distressed home sales on the market. We also saw a slow of new home builds last year, and an uptick in demand at the start of this year, creating a healthy balance of demand in the market.