Question: Do you see the real estate market collapsing like it did in 2008? So many people we knew lost their homes.
Answer: Although no one can predict the future, we don’t see this happening, nor does the National Association of Realtors chief Economist, Lawrence Yun. There are several key indicators of how this market differs.
For one, In the last major housing downturn, there were 8 million job losses in a single year. Now there are virtually none. Though layoffs in the technology and mortgage industries are occurring, they haven’t accumulated enough to form a net job loss, Yun noted. A strong job market bodes well for housing’s future.
The subprime loans that were prevalent during the 2008 housing bust are basically nonexistent today.
Home inventory is less than half of what it was then. This means more of a demand for homes.
About 10% of all mortgage borrowers were delinquent on their loans in the previous housing bust. The mortgage delinquency rate is now at 3.6%, holding at historical lows.
Homes in foreclosure reached a rate of 4.6% during the last housing crash as homeowners who saw their property values plunge walked away from their loans. Today, the percentage of homes in foreclosure is 0.6%—also at historical lows, Yun said. He predicted foreclosures to remain at historical lows in 2023.
Overall, the fundamentals don’t point to a housing market that is operating similarly to the 2008 cycle, Yun said. While home sales are slowing, prices remain good. Also, inventory remains low, which will keep home prices elevated, Yun said. “The chance of a price crash is very small due to the lack of supply.”
We feel Real estate is still a very good long term investment. The economy has its ups and downs, investments have their highs and lows. Hopefully, inflation will come down, making housing more affordable to everyone!