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  • Writer's pictureKim Cuerquis

Is The Housing Market Crashing in 2023?

A home market crisis is expected according to 67% of Americans. Considering all of the recent media coverage on the topic, so many people feel like a housing market crash is inevitable in the next three years. However, it's important to remember that the current housing market is much different than it was in 2008.

Mortgage Standards Were Less High Back Then

It was considerably simpler to obtain a home loan before the housing crisis than it is right now. By decreasing lending requirements and making it simple for almost anyone to be approved for a home loan or refinance an existing one, banks were artificially inflating demand.

Lending institutions consequently assumed substantially larger risk in the supplied mortgage packages as well as the individual. As a result, there were several defaults, foreclosures, and price drops. Things are different now, and mortgage providers have considerably stricter requirements for buyers.

The Mortgage Bankers Association (MBA) provided the data that is used in the graph below to illustrate this point. The easier it is to obtain a mortgage, the higher the index's number. It gets harder the lower the number.

This graph also demonstrates how much has changed since the peak in loan availability before the crash. Tighter lending regulations have aided in averting a scenario that would have resulted in a wave of foreclosures similar to the last time.

Since The Crisis, The Foreclosure Rate Has Greatly Decreased

The number of homeowners who were facing foreclosure when the housing bubble burst is another difference. Since the crisis, there have been fewer foreclosures, partly because today's purchasers are more qualified and less likely to fail on their loans. The graph below uses ATTOM data to show how things have changed since the last time

Therefore, despite a slight uptick, there remain extremely few foreclosures overall. Furthermore, few experts anticipate a dramatic increase in foreclosures, as they did after the 2008 financial crisis. The founder of Calculated Risk, Bill McBride, discusses the impact a significant rise in foreclosures had on housing prices in the past and why it is unlikely to happen again this time.

Today's Housing Inventory Is More Limited.

For historical context, during the housing crisis, there were too many properties for sale (many of which were short sales and foreclosures), which led to a sharp decline in property values. Despite an uptick in supply since the beginning of the year, there is still a lack of inventory overall, largely as a result of years of underbuilding homes.

Data from the National Association of Realtors (NAR) compares the months' supply of homes available presently to the crash. At the current sales pace, unsold inventory has a current supply of just 2.7 months, which is much less than it had previously. Even while certain overheated markets may experience minor decreases, there just isn't enough inventory on the market for home values to fall as they did the last time.

Bottom Line

The information (NAR) should allay your anxieties if recent news has you concerned that there will be another housing crash. The most recent data and expert analysis make it abundantly evident that the market is very different from what it was.

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