Current Housing Market is Unlikely to Experience a Repeat of the 2008 Crash: 5 Key Factors

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As the housing market continues to thrive, it is natural for homeowners to worry about the possibility of another crash similar to the one that occurred in 2008. Recent survey data from LendingTree indicates that 41% of Americans are fearful of a housing crash in the coming year. However, Lawrence Yun, Chief Economist for the National Association of REALTORS®, assured attendees of the Real Estate Forecast Summit that current market dynamics are fundamentally different from those of the Great Recession. Yun identified five key factors that contribute to this distinction:

  1. A strong labor market: In contrast to the 2008 crash, which saw the loss of 8 million jobs in a single year, the current job market remains robust. Although there have been some layoffs in the technology and mortgage industries, they have not yet reached the point of net job loss.

  2. A lack of subprime loans: During the 2008 crisis, subprime loans were prevalent and contributed to the widespread defaults and foreclosures that occurred. Today, such loans are virtually non-existent.

  3. Underbuilding and inventory shortages: Prior to the 2008 crash, annual new-home construction amounted to 7.65 million units. Now, it stands at 4.6 million, resulting in a "massive housing shortage" due to a decade of underproduction in the market.

  4. Low delinquency rates: In the lead-up to the 2008 crash, approximately 10% of mortgage borrowers were delinquent on their loans. Today, the mortgage delinquency rate is at a historical low of 3.6%.

  5. Ultra-low foreclosure rates: During the 2008 crash, the percentage of homes in foreclosure reached a peak of 4.6%. Currently, that figure stands at a historical low of 0.6%. Yun predicts that this trend will continue in 2023.

In conclusion, while it is always important to be mindful of potential risks in the housing market, the current market is characterized by strong labor and housing demand, a lack of subprime loans, inventory shortages, low delinquency rates, and ultra-low foreclosure rates – all of which suggest that a repeat of the 2008 housing crash is unlikely.

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