Think this is a Housing Crisis? Think Again!

There are many unanswered questions caused by this pandemic. Many people are seeing the stock market drop tremendously, people are spending less money during this economic downfall. But is the housing market in trouble? It makes sense to ask this question for those who remember the 2008 housing crisis.

Many of us remember the hardship that was the Great Recession, the recession that started with a housing and mortgage crisis. If it was lost homes to being out of work, it was a thought time for many people. Many people are worrying today, but we are faced with a much more different challenge. A health crisis that caused a pause in many people's lives that is overall affecting the economy and is shutting down many parts of the country.

If we compare to what happened in 2008 vs. now, you'll see that this is still a prime time to buying houses and that a crisis is not among us.

1. Appreciation

Leading up to the housing crash, appreciation was extremely high compared to what we've seen in the past six years. If you look at the graph below, the highest appreciation we've had the past six years is lower than the lowest appreciation we had during those six years leading up to the crash. Prices have been rising lately, but not compared to the spike back in 2008 when we had runaway appreciation.

2. Mortgage Credit

The Mortgage Credit Availablity Index is a monthly measure by the Mortgage Bankers Association that gauges the level of difficulty to secure a loan. The higher it is, the easier it is to get a loan; the lower the index, the harder. We're nowhere near the levels before the housing crash when it was easy to get a loan for a new house. Since the crash though, standards have tightened to help this problem not happen again.

3. Number of Homes for Sale

The supply and demand for houses are one of the causes of the housing crash in 2008. There was not enough demand and the supply was incredibly high. In the graph below, we see that there aren't enough homes on the market for the number of people that want to buy them. In the Antelope Valley, the inventory turnover rate is 1.6. That means if we didn't get any new listings, our inventory would be gone in less than 2 months.

4.  Use of Home Equity

The chart below shows us the difference in how people are viewing the equity in their homes today compared to 2008. Homeowners would use cash-out refinances but use that money on a lifestyle change instead of keeping it in their homes. Today, consumers are being more cautious with equity in their homes.

5. Home Equity Today

Today, 53.8% of homes have at least 50% equity in their homes. During the housing crash, homeowners would walk away from their homes when they owed more than what their house was worth. Compared to now, they're less likely to walk away.

In the end, the health crisis is causing many different challenges compared to the ones we saw in 2008. What we know though is that the housing market is in a much stronger position today compared to 2008. It is no longer the center of an economic slowdown, rather, it could be just the thing that helps pull us out of this slump.