Some speculate that we are heading for a repeat of 2008 housing crash, but the circumstances are far different then they were in 2008 and we will cover some of that here. Housing prices along with constant conversations about recession and government shutdowns does have consumers somewhat on edge, but it is not necessarily signaling a housing market crash. 2008 was a reset of bad lending practices, and general apathy from consumers. Since the 2008 crash many safeguards, which make it much more difficult to obtain a home loan, were put in place to keep that from happening again.
The Mortgage Credit Availability Index (MCAI) was extremely high just prior to the housing bubble in 2008. The lower the index the more difficult it is to obtain a home loan. from 2004-2008 that index shot from just under 400 to over 850 in 2006. Now that number sits around 100. Lenders had lighter qualifications and there were numerous programs to help low to middle income families obtain a mortgage that banks knew were likely to be defaulted on. So as you can see, much harder to get a loan now, and the number has been steady in the low 100’s since the new regulations in 2009.
The unemployment recovery rate also played a big roll in the 2008 bubble. The pandemic saw a rocket increase in unemployment as companies had to shut down for a while in the face of State’s mandating closures of certain businesses. However the jump from pre Covid unemployment numbers to the return of those low unemployment percentages took only a little more than 2 years. The pre housing bubble in 2007 numbers shot up after the bubble, but took over 7 years to stabilize again. Now you can hardly go into any business, store, or restaurant, that is not hiring. America is working again.
Housing supply is extremely low by comparison, and this has made it harder to find the home you are looking for. Also, while not at 50 year averages, the interest rate has ticked up and corrected following Covid numbers. It is my opinion we will never see under 3% Mortgages again, but I do believe they will settle out around 5-6% which was the interest rate just before and after the 2008 crash. People are hanging on to their houses because they have an amazing amount of equity now that the housing market prices have jumped so high after the pandemic. Equity protects, rather than facilitates, a housing bubble.
If you have more than one home it is a great time to sell. If you have to move somewhere for a job change or for retirement then it is still a good time to buy and sell a home. The lack of inventory means your house will likely sell, even though we are seeing a slight uptick in the number of days on market before selling. If you are buying, while it is harder to obtain a loan, the safeguards built into the lending market now make sure of your ability to maintain the payment, barring a loss of employment or some other family catastrophe.
Right now a 250,000 loan for a home is going to cost you about 1600* dollars a month. In my area that is a little under the average rental for a 3BR/2BA home. So it is still cheaper to own then to rent hear in Daphne, Al. So as you can see while the country’s financial stability may be a question mark, the conditions just aren’t there for a housing crash like we saw in 2008. Keep your finger on the pulse of the market. Be a smart, and informed home buyer and use a company that watches for these signs as well. Come see us at Mr. Daphne Real Estate.