2022 saw big changes in the housing market, particularly in terms of borrowing money, but that doesn’t mean there is a crash coming.
“Thanks to record low interest rates over the pandemic years, homeowners could afford bigger mortgages to pay more than the asking price of a home,” says Kristen Davis, Sales Associate at ERA Justin Realty.
“Now that things are returning to normal, some are concerned we could see a repeat of the bubble burst of 2008,” says Jennifer Darby Metzer, Broker/Owner at ERA Justin, “But there are no signs of that.”
That’s because there are some key differences between what’s happening today versus the early 2000s. One difference is: there are far fewer foreclosures on the market today and real estate experts do not predict a flood of foreclosures coming.
In 2008, over 9 million households lost their homes due to foreclosure or short sale. This was because more relaxed lending standards allowed people to take out mortgages they ultimately could not afford. This led to a wave of distressed properties making their way to market, which caused home values to plummet.
But today, revised lending standards are leading to more qualified buyers. Therefore there are fewer homeowners behind on their mortgage payments. According to the Mortgage Bankers Association, mortgage delinquency is down to its lowest level since 1979.
Forbearance programs from the height of the pandemic are also not causing any foreclosures today. “During the pandemic, many homeowners were able to pause payments due to unemployment or a downturn in pay,” says Davis. “There was fear that could cause a wave of new foreclosures. But that also has not materialized.”
Foreclosures are currently at pre-pandemic numbers, and still far below 2008. Which brings us to another big difference: Equity. Homeowners today have more equity in their homes, which means they can afford to tap that money instead of giving up and foreclosing.
If you’re interested in buying but could use some guidance on the current state of the market, Kristen Davis or any of the experienced agents at ERA Justin can help. Give us a call at (201) 939-7500.