Are We Repeating the 2008 Housing Crisis?

The sheer magnitude of the challenges we face today have led many of us to reflect on the last great financial challenge we experienced in this country. The recession of 2008. Because that economic collapse was precipitated by housing and mortgage crisis there is an inclination for us to view today’s challenges through that lens. Certainly, that ongoing health crisis has given us reason to be concerned about the housing market and our economic future.

Let's explore this in depth to see what we know about today's housing market and how it differs from the 2008 situation.

Appreciation

When we look at appreciation in the visual below, there’s a big difference between the 6 years prior to the housing crash and the most recent 6-year span. Leading up to the crash, we had much higher appreciation in this country than we see today. In fact, the highest level of appreciation most recently is below the lowest level we saw leading up to the crash. Prices have been rising lately, but not at the rate they were climbing back when we had runaway appreciation.

Mortgage Credit

The Mortgage Credit Availability Index is a monthly measure by the Mortgage Bankers Association that gauges the level of difficulty to secure a loan. The higher the index, the easier it is to get a loan, the lower the index, the harder. Today we’re nowhere near the levels seen before the housing crash when it was very easy to get approved for a mortgage. After the crash, however, lending standards tightened and have remained that way leading up to today.

Number of Homes for Sale

One of the causes of the housing crash in 2008 was an oversupply of homes for sale. Today, as shown in the next image, we see a much different picture. We don’t have enough homes on the market for the number of people who want to buy them. Across the country, we have less than 6 months of inventory, an undersupply of homes available for interested buyers.

Use of Home Equity

The chart below shows the difference in how people are accessing the equity in their homes today as compared to 2008. In 2008, consumers were harvesting equity from their homes (through cash-out refinances) and using it to finance their lifestyles. Today, consumers are treating the equity in their homes much more cautiously.

Home Equity Today

Today, 53.8% of homes across the country have at least 50% equity. In 2008, homeowners walked away when they owed more than what their homes were worth. With the equity homeowners have now, they’re much less likely to walk away from their homes.

Health Crisis Not Housing Crisis

The COVID-19 crisis is causing different challenges across the country than the ones we faced in 2008. Back then, we had a housing crisis; today, we face a health crisis. What we know now is that housing is in a much stronger position today than it was in 2008. It is no longer the center of the economic slowdown. Rather, it could be just what helps pull us out of the downturn.

Are you interested in talking with any of our friendly team about purchasing or selling?  You could be incredibly surprised by the current value have your home any equity you have accrued. Why not give your Oly Pen Real Estate Team a call today at 360.249.8187 or stop by our office 141 S. Main Street in friendly Montesano, WA and discuss your expectations today!