Feb 27 2019 59455 1

Dated: February 28 2019

Views: 56

3 Reasons Why We Are Not Heading Toward Another Housing Crash

3 Reasons Why We Are Not Heading Toward Another Housing Crash | MyKCM

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:

  1. Home Prices

  2. Mortgage Standards

  3. 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.

Blog author image

Marco Murad

Off Market Specialist. Specialties: Buyer's Agent, Listing Agent, Relocation, Commercial R.E. I'm a real estate consultant who's made a career of an excellent track record of outstanding results an....

Want to Advertise on this Site?

Latest Blog Posts

What To Know About Bidens First Time Homebuyer Tax Credit

What to Know About Biden's First-time Homebuyer Tax Credit?Then-candidate and now president-elect Joe Biden proposed several housing initiatives, including a first-time homebuyer tax credit "up to"

Read More

HOW TO GET READY FOR RETIREMENT

HOW TO GET READY FOR RETIREMENTFor most people, retirement feels like a long way off. But, if you don’t start preparing as early as possible, you may find yourself in a place of financial

Read More

CREATE THE HOME OFFICE OF YOUR DREAMS

CREATE THE HOME OFFICE OF YOUR DREAMSWhether you work full-time at home or occasionally need to conduct business in the evenings or on the weekends, a home office a great way to utilize an extra.

Read More

New Hampshire HOTEL DEVELOPMENT SITE AVAILABLE

New Hampshire HOTEL DEVELOPMENT SITE AVAILABLEVital Source Realty presents the fee simple interest in, 7-acre development site (233 US-3Twin Mountain, NH 03595), approved for a 60-key select

Read More