Today’s Housing Market Won’t Crash Like 2008 (Podcast)

2023 is not 2007 all over again

Home prices saw astronomical growth over the last few years, spurred by pandemic market conditions.

Because of this, fears of a looming crash permeate the industry. In this podcast, Craig Berry discusses why today’s market is nothing like it was when the bubble popped 15 years ago. He is joined by Mike Hardy, a managing partner at Churchill Mortgage and co-founder of Cyrus Capital Management.

Here’s what they had to say on a recent episode of The Mortgage Reports Podcast.

Listen to Craig on The Mortgage Reports Podcast!

Housing market is strong despite affordability challenges

Despite the very real affordability issues home buyers face, the housing market is currently experiencing a period of strength.

While there’s plenty of talk about a crash mirroring 2008’s, the driving factors from that aren’t present in the current market. From 2006 to 2010, the number of buyers entering the market dropped, resulting in lower demand for housing. This, coupled with a glut of supply, led to a decrease in housing prices. Additionally, the prevalence of adjustable rate mortgages (ARMs), which move with the marketplace, contributed to the overall instability.

In contrast, lower supply and higher demand characterize the current housing sector. Due to high prices from the last few years, Craig and Mike explain that there is a pent-up demand from potential buyers who are unable to afford a house at the moment. The amount of prospective buyers outweigh the available properties for sale.

The hosts also highlight the comparative improvements in the credit market, stating the current credit market is the cleanest it has been in decades, with more equity in homes providing a larger buffer to foreclosure in case of a downturn.

High interest rates benefit housing

As counterintuitive as it may seem, higher mortgage rates actually benefit the housing market in the long run.

While not ideal for borrowers or lending volume, they should help slow the pace of real estate value growth and stabilize them at large. High rates should also bring about more for-sale inventory. If both of those come to fruition, homeownership will become more attainable for the younger generations.

Additionally, the longer we stay in a higher interest rate environment, the more loan officers will wash out of the business. The ones who withstand this leaner time, will be those who bring more value to the marketplace, according to the hosts.

Buy a home now, not later

Although prices and rates make home buying a challenge, you should do it if you find a property you like and can afford it.

Trying to time the market and wait for rates to come down to buy can be a flawed thinking. This is akin to waiting for a Black Friday sale when everyone else is there, resulting in chaos and settling for a house that may not be desired.

Craig and Mike also provide some advice on the long-term benefits of buying a home. They explain that in an aggressive market, real estate values are likely to double in 10 years, in a normal market it takes 15 years, and in a slow market it takes 20 years.

They attribute this trend to basic inflation and argue that buying a home now and holding onto it for a decade or more can lead to significant financial gains. They caution against waiting for rates to come down unless it is absolutely necessary due to affordability constraints.

The bottom line for borrowers

Fear of a market collapse surrounds current borrower decisions on whether they should buy or sell a home. And while this is natural when conditions aren’t ideal, Craig and Mike encourage borrowers to push past it and move toward their homeownership goals.

In addition to the underlying metrics not supporting any upcoming crash, buying now, if you’re able, would avoid a frenzied market when interest rates eventually fall. You’d also begin accumulating home equity and, in turn, build your personal wealth.

If you’re ready to begin the home buying process, reach out to a local mortgage professional today.