Why Today’s Housing Market is Not 2008: Why There’s No Need to Fear Foreclosures 🏡📉
You may have heard people talking about the potential for a housing bubble, but here’s the truth—today’s market is not like it was back in 2008. One of the main reasons why we’re not heading toward a foreclosure crisis is because homeowners today have a LOT more equity than they did during the last housing bubble.
Unlike in 2008, where many homeowners owed more on their mortgage than their home was worth (also known as being “underwater”), today’s homeowners are sitting on a lot of equity. That means if someone struggles to make their mortgage payments, they have more options—they could sell their home and still come out ahead thanks to the equity they’ve built up. Even if home values dip, the majority of homeowners will still have a cushion of equity to fall back on.
More Equity = Less Foreclosure Risk
Did you know that, according to the St. Louis Fed, total homeowner equity is nearly three times higher than total mortgage debt? This is a huge difference compared to 2008 when so many homeowners had little to no equity, leaving them with few options other than foreclosure. With high equity, homeowners are in a much stronger position today.
So, even if home prices dip, most homeowners today still have plenty of equity to avoid the kind of distress we saw during the last housing crisis.
Delinquency Rates Are Still Near Historic Lows
Another big factor to consider is that delinquency rates (the number of mortgage payments more than 90 days late) are still at historic lows. Thanks to various loan assistance programs and options available to homeowners who face temporary hardships, it’s easier for homeowners to avoid foreclosure. These programs help homeowners get back on track without having to lose their homes.
As Marina Walsh, VP of Industry Analysis at the Mortgage Bankers Association (MBA) puts it, “Servicers are helping at-risk homeowners avoid foreclosures through loan workout options that can mitigate temporary distress.”
Low Unemployment Helps Keep the Market Stable
When people have stable jobs, they’re in a better position to make their mortgage payments, which is why low unemployment is another positive sign for the housing market. With the current unemployment rate being so low, more people are able to afford their homes, which reduces the risk of foreclosures. Back in 2008, high unemployment rates contributed to a wave of foreclosures, but we’re in a much stronger economic position today.
Bottom Line: No Need to Worry
While mortgage debt is higher than ever, homeowners today are in a much better financial position than they were in 2008. There’s no need to fear a wave of foreclosures or distressed sales like we saw after the housing crash. Thanks to higher equity, low unemployment, and various support systems in place, today’s homeowners are better equipped to handle tough times without losing their homes.
If you’re wondering how this all affects your home search or sale, feel free to reach out! I’m here to help guide you through the market and answer any questions you may have.
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