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Are We Headed for a Housing Crash? Why 2021 Is Nothing Like 2008

Key Takeaways:

  • Last March, many feared that the once-in-a-lifetime pandemic would cause a market crash—but real estate actually had its best year ever.
  • As prices continue to increase, many are wondering if we’re headed towards a housing bubble akin to what we saw in 2008.
  • Believe it or not, the market is nothing like it was more than a decade ago—and Linda Craft & Team can help you make sense of it all.

6 Reasons Why the Market Is Nothing Like 2008

Last year, the world experienced an unprecedented global pandemic. And despite countless grim predictions, the housing market actually had its best year ever—and it’s showing no signs of slowing down. Home sales and prices were both up substantially over the year before, causing many to wonder if we’re headed towards another housing crash in 2021.

While it’s impossible to predict the future, today’s market is nothing like it was in 2008. Here are six reasons why another housing crash isn’t likely anytime soon.

Mortgage standards are tighter than ever

Increasing interest rates in 2008

During the housing bubble, almost anyone could qualify for a loan. This caused many buyers to borrow more than they could afford, resulting in mass foreclosures. Today, it’s significantly harder to get a mortgage, largely thanks to laws that were passed after the Great Recession.

Recently, the Urban Institute released their latest Housing Credit Availability Index (HCAI), which measures the percentage of owner-occupied home purchase loans that are likely to default. The HCAI currently sits just under 5%—that’s less than half of what it was in the 2000s!

Prices remain relatively stable

Piggy bank on paperwork

It’s normal for homes to increase in value over time. However, leading up to the housing bubble in 2008, we saw appreciation rates well over 8% for more than four years in a row. While it may seem like houses keep getting more expensive, today’s appreciation rates are still relatively normal, and they should stabilize as time goes on.

There’s a shortage of homes on the market

For Sale sign in 2008

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more will causes prices to depreciate, and anything less leads to a shortage. In 2007, there was actually an oversupply of homes for sale—today, supply has dwindled to just 2.1 months. This further proves that today’s market is nothing like the housing bubble.

New construction isn’t filling the void

New construction builder

Right before the housing crash, we also saw an abundance of new construction homes over-saturating the market. Today, the number of homes built has reached a 50-year low, and these numbers aren’t expected to budge anytime soon.

Houses aren’t too expensive to buy

Calculating home values

Affordability can be calculated by determining the price of a home, the wages earned by the purchaser, and the mortgage rate available at the time. Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate is about 3%. This means the average homeowner is spending less per month on their mortgage than they were in 2008.

Homeowners have more equity than they think

House with coin stacks

Leading up to the housing bubble, homeowners were using their homes as personal ATMs. Many immediately withdrew their equity once it built up, and they lost quite a bit of money in the process.

As property values keep appreciating, homeowners now have more equity than ever. In fact, the average home has nearly $200,000 in equity. And in real estate, more equity helps to strengthen the overall market.

Buy or Sell in Today’s Hot Market!

Want to make the most of 2021’s competitive market? Contact Linda Craft & Team at 919-235-0007 for all things Raleigh real estate! We have more than 350+ years of experience, and we look forward to offering you five-star service every step of the way.

Want to know how much your home has increased in value? Request your free home valuation to get started—it’s fast, free, and there’s no obligation to list!

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