EXPERTS SAY RISK OF HOUSEING CRASH IS LOW

Dated: September 24 2022

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Expert Say Risk Of Housing Crash Is Low:

The dramatic escalation of housing demand and prices have many worrying about a repeat of the early 2000s and another housing crash. By the spring of 2021, Google reported a 2,450% spike in the search "When is the housing market going to crash?" . Yet, expert continue to believe that the risk of a crash similar to 2008 is very low. There are many factors that are tamping down alarm bells, but one of the most significant is the stricter lending standrads that emerged after the last crisis.

In the lead up to the housing crash 2008, lending standards were (very lex and almost non-existent. But today, lending requirements are still quite strict. There are no sub-prime loans compelling non-qualified buyers to take no "no doc" or NINJA loans being marketed to vulnerable populations, or ARMs with large ballon payments after initial lower introductory rates.

The standerds for extending mortgage credit by lenders become more strict. The economic and underwriting factors that led up to 2008 are not present in today's market. FED policy, 10 year treasury and underwriting conditions guidelines and criteria regarding credit assets, and income have become standardized.  The secondary market that purchased mortgaged backed securities mandated stricter underwriting scurity in order to rebuild trust for marketable securities on the open market. This singular change in our housing market created stabilty, trust, and growth in the real estate industry once again. However, the gap in affordability is ever increasing.

The overall share of mortgages in forbearanc peaked in the middle of 2020, but has declined slowly since. These programs are also contributing to housing price increases, as forbearance is preventing loan defaults and allowing mortgage holders to retain their homes, which maintains a tighter supply.

In addition to these factors, mortgage rates at historick lows, which also compels home buying , as well as refinancing. For decades, mortgage rates hovered closer to 10%. For perspective, in 1974, interest rate were at just over 9%. By the early 1980s, rates skyrocked, hitting a peak in 1981 of nearly 17%. They've declined steadly since then, and over the last decade have flattened out, remaining in the 3-4% range. The pandemic and the economic recession that ensued drove mortage rate to all-time lows in 2020 and 2021, with rate falling below 3% for a 30-year fixed-rate mortgage and close to 2% for a 15-year fixed-rate mortgage.

This kind of historical knowledge is important for homebuyers, espacially first-time home buyers, to understand. Rate don't stay the same forever, so on the one hand, home buyers considering ARMs need to understand that rate change. At this current moment, rates are far more likely to go up than down-and history shows us that those increases can be substantial. Such considerations should factor into my home buyers thinking, and educating clients in this way provides real value.

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Ghulam Sarwari

My Name Is Ghulam Nabi Sarwari, I Was Born In 07/14/1960 In Kandahar, Afghanistan.I Finished My Elementary, Middle And Hi School In Kandahar, Afghanistan and In 1978 I Started In The Engineering Facul....

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