Four things you need to know about a potential housing crash.
Is our housing market going to crash? If you’ve been paying attention to the news, you might think that’s the case, but the truth is you have nothing to worry about. Today, I’m here to discuss a few key ways that the current housing market differs significantly from the last crash:
1. Getting a Loan Now Is Much More Difficult
As we approached the crash in 2008, practically anyone could get a mortgage, resulting in the widest availability of credit in history. However, today we are experiencing some of the lowest credit availability in history. Lending standards have become much stricter. While there are some adjustable-rate mortgages available to address the affordability crisis, they typically require higher down payments and better credit scores to qualify.
2. Unemployment Is Very Low
Currently, we have an impressively low unemployment rate across the country, and it’s even lower here in Virginia. As long as unemployment remains low, people generally don’t face severe financial hardships. Although inflation has been challenging and consumer debt has been rising, these factors do not directly translate to changes in the housing market.
“Low inventory is keeping our market in check.”
3. Housing Inventory Is Very Low
While there has been a slight increase in housing supply, we are still far from reaching a balanced market. In 2007 and 2008, there was an ample housing supply, typically lasting eight to 10 months. However, today we only have around three months of housing supply. Until a significant amount of new inventory enters the market, we will continue to face supply and demand imbalances.
4. Homeowners Have Tons of Equity
Despite diminishing inventory over the past decade, home equity has consistently increased, resulting in substantial homeowner wealth tied up in real estate—over $3.1 trillion in the U.S. Having substantial equity in their homes enables people to weather a mild recession and access funds if needed during challenging times. Moreover, with such high levels of equity, homeowners are less likely to be compelled to sell, which means there won’t be a flood of new inventory if a recession were to occur.
It’s important to approach news reports with caution and consider the actual market conditions. If you have any questions, wish to dispel any myths, or explore how this impacts your local area, feel free to contact me via phone call or email. I’m always here to assist you.