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  • Writer's pictureAmber S

3 Graphs Showing Why The Housing Market is NOT like 2008

3 graphs
There is concrete data showing why now is nothing like last time.

With 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 time.

1. There's still a shortage of homes on the market today.

For historical context, there were too many homes for sale during the housing crisis of '08 (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.

This graph uses data from the National Association of Realtors® (NAR) to show how the months' supply of homes available now compares to the crash of '08.

Today, unsold inventory sits at just a 3.2 months' supply, which is significantly lower than the last time (10.4).

This tells us that there just isn't enough inventory on the market for home prices to come crashing down like they did in '08, even though some overheated markets may experience slight declines.

2. Mortgage standards were much more relaxed back then.

During 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 (even if they could not afford it) or refinance their current home.

Back 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. Since then, things have been much different and purchasers face much higher standards from mortgage companies.

This graph uses Mortgage Credit Availability Credit (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.

Graph showing lending standards are under control
In the latest report, the index fell by 5.4%, which shows standards are tightening.

This graph shows 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.

3. The foreclosure volume is nothing like it was in 2008.

Another 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.

Graph showing US Foreclosure Starts
This graph uses data from ATTOM Data Solutions to help paint the picture of how different things are now.

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 time. According to CoreLogic, “The total average equity per borrower has now reached almost $300,000, the highest in the data series.”

Executive VP of Market Intelligence at ATTOM Data, Rick Sharga explained the impact this has, "Very 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.”

Bottom Line

If you're concerned we're making the same mistakes that led to the housing crash of 2008, the graphs above should help alleviate your fears. It's hard to argue with concrete data and expert insights.

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