If you’re keeping an eye out for signs of a housing market crash, let’s take a closer look at the data. Spoiler alert the outlook isn’t pointing towards a downturn anytime soon. Instead, industry experts are projecting a continued rise in home prices.

Today’s housing landscape stands in stark contrast to the pre-2008 housing crash era, and here’s why.

Securing a loan for a home purchase is a much more stringent process nowadays, and surprisingly, that’s a positive development. Before the 2008 crisis, obtaining a mortgage was considerably easier, with lax lending standards that extended opportunities to nearly everyone, including those with questionable financial backgrounds. However, the scenario has evolved significantly. Mortgage companies now impose higher standards on prospective homebuyers, as illustrated in the graph below, which utilizes data from the Mortgage Bankers Association (MBA). A lower value on the graph indicates stricter mortgage approval criteria, while a higher value signifies more relaxed standards

The peak depicted in the graph highlights the comparatively lax lending environment prevalent during the pre-crash period. Consequently, financial institutions assumed considerable risks, both in terms of borrower qualifications and the types of mortgages extended, which ultimately resulted in widespread defaults and a surge in foreclosures.

Furthermore, today’s market witnesses a scarcity of available homes for sale, precluding any possibility of a price crash akin to that experienced during the housing crisis. Unlike the surplus of properties flooding the market back then, the current inventory levels remain notably low.

Presently, unsold inventory hovers at a mere 3.0-month supply, a far cry from the peak of 10.4 months observed in 2008. This scarcity implies insufficient inventory to trigger a significant downturn in home prices.

Another factor contributing to the market’s stability is the prudent behavior of homeowners regarding equity usage. Unlike the pre-crash period, where homeowners frequently leveraged their home equity to finance lavish purchases, today’s homeowners exercise greater caution.

According to Black Knight, tappable equity, representing the amount of equity available to homeowners before reaching an 80% loan-to-value ratio, has reached record highs. This increased equity cushion indicates that homeowners are better positioned to weather any market fluctuations compared to the early 2000s.

Black Knight’s report further highlights the resilience of homeownership, with only 1.1% of mortgage holders ending the year underwater, down from 1.5% in the previous year. This improved financial standing reduces the likelihood of distressed properties flooding the market, thus preventing any significant price depreciation.

In summary, despite hopes for a market correction, current data suggests otherwise. The prevailing research underscores the vast disparity between today’s market conditions and those of the past.Â

Reach out to your local Realtor Steve Ord to discuss any questions or concerns you have about our current Real Estate Market. Cell phone 702-721-6928.Â