I often get asked by buyers and sellers if we are moving toward a housing market crash. Indeed, you even see the words “housing crash” in the media from time to time. Yes, the market has been challenging for buyers for some time, with rising prices, limited inventory, and competition for many listings and homes sometimes selling at and above asking price. However, today’s market conditions are very different from what preceded the recession.
I subscribe to a Realtor website called Keeping Current Matters that helps me stay abreast of housing market issues that my clients and prospects should know about; I wanted to share this article, with KCM’s permission since I am a member, with you.
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“With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.
Here are three key metrics that will explain why:
- Home Prices
- Mortgage Standards
- Foreclosure Rates
HOME PRICES
A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.
Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.
MORTGAGE STANDARDS
Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,
“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
Last month, their January Housing Credit Availability Index revealed:
“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”
FORECLOSURE INVENTORY
Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:
“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”
Bottom Line
After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.
“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”
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I hope you found this information useful and informative, and reassuring.
If you would like to talk more specifically about the market conditions in the areas that interest you (Carlsbad, San Marcos, Oceanside, etc.), as well as about your housing needs and budget, please give me a call at (760) 840-1360. I can help you understand the market conditions and the impact they can have on your search, making an offer, and being successful in our market.