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3 Reasons Why We Are Not Heading Toward Another Housing Crash

Thursday, February 21, 2019   /   by Jordan Waters

3 Reasons Why We Are Not Heading Toward Another Housing Crash

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 Survey94 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.


  colorado real estate, sellers, buyers, first time homebuyers, move up buyers

The Kevin Schumacher Team at EXP Realty, LLC
1615 Foxtrail Drive, Ste 260
Loveland, CO 80538
720-230-3030

Information and Real Estate Services, LLC. Provided for limited non-commercial use only under IRES Rules. © 2020 IRES. Listing information is provided exclusively for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Information deemed reliable but not guaranteed by the MLS or eXp Realty LLC. *Not intended to solicit buyers under buyers agency, not intended to solicit listings currently listed.*The statements and opinions contained in this advertisement are solely those of the individual author and do not necessarily reflect the positions or opinions of eXp Realty, LLC, or its subsidiaries or affiliates (the “Company”). The Company does not assume any responsibility for, nor does it warrant the accuracy, completeness or quality of the information provided.
Information and Real Estate Services, LLC. Provided for limited non-commercial use only under IRES Rules. © 2020 IRES. Listing information is provided exclusively for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data last updated September 20, 2020 10 PM. Information deemed reliable but not guaranteed by the MLS or Kevin Schumacher - The Kevin Schumacher Team / EXP Realty, LLC.
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