Despite that the banks and the government claim a crash can't happen again, not much has changed, except that the large banks crushed competitors and guaranteed their bailouts by depositors through Dodd-Frank.
No money down loans have been very popular through the FHA which only requires 3.5% down. But the dirty little secret is that the buyer can get up to 6% in seller concessions. Almost every FHA offer I receive is a no money down deal. When I question the agents it's always the same answer, their clients don't have any money. Well, then why are they buying a house?
Another bigger problem is non-recourse loans. Now I know most borrowers love this, but it can set up the market for disaster, especially when homeowners have no equity. I'm in Arizona and was at the center of the housing bubble. By Arizona law, lenders cannot sue most homeowners for walking away on an original purchase money mortgage. (There are some exceptions) So when there was a downturn in the market, many homeowners with no equity pulled the plug on their mortgage because they had nothing to loose except trashing their credit for a short time. Many of these homeowners could afford their loans, but bought a cheaper home down the street and let their other home go to foreclosure. This fed on itself and accelerated a downturn into a crash.
I listened to an interview with the CEO of a company that just rides real estate cycles buying large parcels of land during busts and reselling them during the next boom. He said their main strategy for real estate investing is that people never learn.
Disclosure: My forum posts are not a substitute for professional advice. Replying to a post does not create agency, and I do not represent anyone through forum messaging. Always seek the advice of a real estate professional before acting on any information that I provide.
