Why Today is Nothing Like the 2008 Housing Crash

Why Today is Nothing Like the 2008 Housing Crash

December 27th, 2022

According to LendingTree, a recent survey showed 41% of Americans fear a housing crash.

Even though the Great Recession happened nearly fifteen years ago, many homeowners can’t help but worry that today’s market will mirror the Housing Crash of 2008 – a time when the housing market was on fire and then abruptly hit a brick wall.

The Fear of Another Great Recession

Are Americans’ fears reasonable?

“People are remembering the crushing and painful foreclosure crisis. So, it has become a key question: Will home prices crash after the strong run-up in prices across the country over recent years?” stated the chief economist for the National Association of Realtors (NAR), Lawrence Yun.

Earlier this month at the NAR’s Real Estate Forecast Summit, where the country’s chief housing economists gave their real estate market forecast for 2023, Yun reassured the public our current real estate market is unlike the Great Recession of 2008.

What are the differences between today and 2008? There are several vital components.

Risky Loans

In 2008, subprime loans were widespread. 

A subprime loan is offered at higher interest rates for individuals who don’t qualify for a conventional loan because of poor credit, limited collateral, or no credit history. These are riskier loans than traditional loans.

Today, there are very few subprime loans offered. 

Delinquency on Loans

During the 2008 Housing Crash, nearly 10% of borrowers were delinquent on their mortgages. According to Yun, the mortgage delinquency rate is at a historic low of 3.6%.

During NAR’s Real Estate Forecast Summit, Yun also said he anticipates 2023 foreclosures to remain at historic lows.

Inventory Lows

Before The Great Recession, new-home construction saw 7.65 million units per year. Today, new-home construction is 4.6 million units, creating a considerable housing shortage – unlike in 2008. 

Labor Market

The global economic downturn in 2008 was tightly aligned with an estimated 10 million Americans losing their jobs, creating a domino effect in missed mortgage payments and foreclosures.

Today’s job market remains strong. And, as Yun noted, a healthy labor market indicates a favorable future housing market.

Foreclosure Rates

As homeowners saw their property values plummet, many felt it was wiser to default on their mortgages and allow their homes to foreclose. During the housing crash, the foreclosure rate hit 4.6%. Today, the US has a 0.6% foreclosure rate.

The Bottom Line

Although the wounds from the Great Recession have not entirely healed, it is essential to understand that there are distinct differences between then and now. 

Because there are no loose lending practices, millions of Americans are not losing their jobs, and there is not a high rate of foreclosures, today is not a repeat of the 2008 Housing Crash.

Please get in touch with us if you have questions about the market or want to discuss buying or selling your home.