If you’re in the market for a new home, you may have heard whispers of impending doom. With affordability challenges and media hype about an impending recession, it’s no wonder buyers are feeling a bit skittish. But fear not! Despite the doom and gloom predictions, there are many reasons why the housing market is not about to crash. In this article, we’ll debunk the most common misconceptions to help you feel confident in your home-buying decisions.
It’s Harder To Get A Loan Now:
Back in 2008, banks had different lending standards, making it easy for just about anyone to qualify for a home loan or refinance an existing one. As a result, 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. However, the housing and banking industry learned valuable lessons from this experience and have taken steps to make sure history doesn’t repeat itself. Regulations have been put in place to prevent risky mortgages, and lending standards have been tightened. This means fewer risky borrowers and lower risk to lenders.
Unemployment Recovered Faster This Time:
One of the biggest drivers of default and foreclosure is job loss. During the last recession, unemployment peaked at 10%, leading to a high number of homeowners who couldn’t afford their mortgage payments. This time around, unemployment peaked at 14.8% but has dropped significantly since, currently sitting at 6%. The Federal Reserve has also taken unprecedented action, keeping interest rates low and pumping money into the economy, which has helped keep homeowners afloat. With fewer people unemployed and economic stimulus measures in place, the risk of a wave of foreclosures is greatly diminished.
There Are Far Fewer Homes for Sale Today:
There were too many homes for sale during the last housing crisis, many of which were short sales and foreclosures. This created a glut of inventory that caused prices to plummet. Today, the opposite is true; there is a shortage of inventory available. This is primarily due to years of underbuilding homes, which has resulted in a supply shortage. According to the National Association of Realtors, there is only a 2.2-month supply of existing homes for sale, indicating a strong seller’s market.
Equity Levels Are Near Record Highs:
Home prices have been steadily increasing, primarily due to a lack of supply and low-interest rates. This has resulted in homeowners having record amounts of equity in their homes. The average homeowner has seen their equity increase by over $25,000 in the past year alone. This equity can be leveraged for home improvements, a down payment on a new home, or other financial goals. So, instead of fearing a housing crash, current homeowners can feel confident in the value of their investment.
In conclusion, while it’s natural to feel anxious about the future, the housing market is not on the brink of a crash. Instead, the market is experiencing a strong seller’s market due to years of underbuilding and tight lending standards. Homeowners have a high level of equity, and economic stimulus measures have helped prevent a wave of defaults and foreclosures. If you’re in the market for a new home, don’t let fear hold you back. With the right information and guidance, you can find your dream home and take advantage of the many benefits of homeownership.
