Helping you buy and sell real estate in Boulder County and beyond
all the headlines and talk in the media about the shift in the housing market,
you might be thinking this is a housing bubble. It’s only natural for those
thoughts to creep in that make you think it could be a repeat of what took
place in 2008. But the good news is, there’s concrete data to show why this is
nothing like the last tim
There’s Still a Shortage of Homes on
the Market Today, Not a Surplus
historical context, there were too many homes for sale during the housing
crisis (many of which were short sales and foreclosures), and that caused
prices to fall dramatically. Supply has increased since the
start of this year, but there’s still a shortage of inventory available
overall, primarily due to almost 15 years of underbuilding homes.
graph below uses data from the National
Association of Realtors (NAR) to show how the months’ supply of homes
available now compares to the crash. Today, unsold inventory sits at just a
3.2-months’ supply at the current sales pace, which is significantly lower than
the last time. There just isn’t enough inventory on the market for home prices to come
crashing down like they did last time, even though some overheated markets may
experience slight declines.
Mortgage Standards Were Much More
Relaxed Back Then
the lead-up to the housing crisis, it was much easier to get a home loan than
it is today. Running up to 2006, banks were creating artificial demand by
lowering lending standards
and making it easy for just about anyone to qualify for a home loan or
refinance their current home.
then, lending institutions took on much greater risk in both the person and the
mortgage products offered. That led to mass defaults, foreclosures, and falling
prices. Today, things are different, and purchasers face much higher standards
from mortgage companies.
graph below uses Mortgage Credit Availability Index (MCAI) data from the Mortgage
Bankers Association (MBA) to help tell this story. In that index, the
higher the number, the easier it is to get a mortgage. The lower the number,
the harder it is. In the latest report, the index fell by 5.4%, indicating
standards are tightening.
graph also shows just how different things are today compared to the spike in
credit availability leading up to the crash. Tighter lending standards over the
past 14 years have helped prevent a scenario that would lead to a wave of
foreclosures like the last time.
The Foreclosure Volume Is Nothing
Like It Was During the Crash
difference is the number of homeowners that were facing foreclosure after the
housing bubble burst. Foreclosure activity has been lower since the crash,
largely because buyers today are more qualified and less likely to default on
their loans. The graph below uses data from ATTOM
Data Solutions to help paint the picture of how different things are this
to mention, homeowners today have options they just didn’t have in the housing
crisis when so many people owed more on their mortgages than their homes were
worth. Today, many homeowners are equity rich. That
equity comes, in large part, from the way home prices have appreciated over
total average equity per borrower has now reached almost $300,000, the
highest in the data series.”
Sharga, Executive VP of Market Intelligence at ATTOM Data, explains the
impact this has:
few of the properties entering the foreclosure process have reverted to the
lender at the end of the foreclosure. . . . We believe that this may be an
indication that borrowers are leveraging their equity and selling their
homes rather than risking the loss of their equity in a foreclosure auction.”
goes to show homeowners are in a completely different position this time. For
those facing challenges today, many have the option to use their equity to sell
their house and avoid the foreclosure process.
you’re concerned we’re making the same mistakes that led to the housing crash,
the graphs above should help alleviate your fears. Concrete data and expert
insights clearly show why this is nothing like the last time.