With the current housing boom continuing well into 2021, many existing or potential homeowners are now carefully considering their next steps. The anxiety is understandable, with the housing boom of the Great Recession less than 20 years ago still fresh in our minds. However, while this housing boom is not sustainable and the real estate market will eventually change, key differences show us that a crash is not likely.
Higher Lending Standards
One of the most significant driving factors of the housing market crash during the Great Recession was the lax lending standards that allowed many homebuyers to qualify for a loan, despite not being able to afford the homes they purchased. Today, because of that housing crash, mortgage lending is a more heavily regulated industry with stricter and more transparent policies in place.
Mortgage Forbearance Programs
Unlike during the Great Recession, several mortgage forbearance programs are helping homeowners stay in their homes affordably, even if the COVID-19 pandemic has negatively impacted their finances. These programs have been vital in preventing a mass number of foreclosures that had contributed to the previous housing market crash.
Price Growth Trends
Industry experts predict that the increase in home prices will slow down but won’t stop entirely and, fortunately, won’t start sliding backward. New home construction is beginning to move again, adding to the available inventory in many locations. This brings down home prices in markets with a low existing home inventory, cutting down on the unnecessarily inflated home prices caused by the additional demand.
Many homeowners are enjoying having extra equity in their homes now that their value has increased. During the Great Recession, many lenders stressed cash-out refinance loans that allowed homeowners to use their equity to receive cash, whether for home updates, to consolidate debt, to pay for college, etc. However, with more transparency in mortgage refinancing, homeowners are more aware of the long-term effects. A mortgage refinance may still benefit some homeowners, and there is increased clarity in understanding the opportunities and disadvantages a refinance could provide.
Insight from the Past
Another reason our current housing market is not headed toward the same devastating crash we experienced over 15 years ago is just that we’ve already experienced it. The lending industry has fundamentally changed, but so has the real estate industry as a whole. Agents now market homes within a potential buyer’s budget, and potential buyers are much better educated about the process involved in buying a home.
If you are ready to purchase a home, whether your first house, relocation, or even a vacation property, contact Network Title today. We can help you through the real estate closing process to get into the home of your dreams.