It’s no secret that the housing market took a major hit in 2008. However, what many people don’t realize is that the housing market has since rebounded and is stronger than ever. In fact, there are a number of reasons why the current housing market is nothing like 2008.
1. Home values have increased.
In 2008, home values plummeted, leaving many homeowners “underwater” on their mortgages (i.e., owing more to the bank than their home was worth). Fast-forward to today, and home values have not only recovered, but they’ve increased significantly in many parts of the country. This means that homeowners have built up equity in their homes and are therefore less likely to walk away from their mortgages if they experience financial hardship.
2. Mortgage requirements are stricter.
In the years leading up to the housing crash, lenders were approving loans for just about anyone with a pulse. This made it easy for people to buy houses they couldn’t really afford and fueled the housing bubble that eventually burst. Today, however, lenders are much more cautious about who they approve for a loan. Borrowers now have to go through a more rigorous application process and provide more documentation to prove their income and employment history. As a result, there is far less risk of another housing crash caused by widespread loan defaults.
3. There is more regulation in the mortgage industry.
Following the housing crash, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to increase regulation in the financial industry and prevent another economic meltdown. One key provision of this law is the Qualified Mortgage rule, which requires lenders to make sure borrowers can actually afford their loans before approving them. This has made getting a mortgage much harder for some people, but it has also helped reduce the risk of another housing market collapse.
So what does all this mean for you? If you’re thinking of buying a house, rest assured that the current housing market is much different—and much stronger—than it was in 2008. Prices have recovered, lending standards are stricter, and there’s more regulation in place to protect borrowers (and investors). Of course, as with any major purchase, it’s important to do your homework before buying a house. But if you’re ready to take the plunge, know that the current housing market conditions are much more favorable for buyers.