Is a Housing Crash Coming?

Filed under: Real Estate Market

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This is a frequently asked question in the real estate industry: is a housing crash coming? Because the housing market is booming right now, people seem to think a big crash must be on its way. Here’s why the real estate market isn’t the same as what it was in 2008 before the big hit.

  • Most People Have Equity in Their Home: Because the market is doing well right now, homeowners have gained equity in their homes. If they had been renting for the last ten years, then all that would be lost. This motivates people to want to buy and build equity by owning a home.
  • Low-Interest Rates Lead to Debt Consolidation: When the interest rates are so low, homeowners can refinance and lock in a new, lower interest rate. This can lead to lower monthly mortgage payments or shorter mortgage loans—all good news for homeowners.
  • Fixed-Rate Mortgages to People with Good Credit: The Dodd-Frank Act came out after the last crash and revamped the mortgage industry. No longer are loans given to people who are one day out of bankruptcy. In order to get a mortgage loan, you have to prove you have the income and credit history to pay off your loan. And with a fixed-rate mortgage, people are steadily paying down their loans with the same mortgage payment each month. In 2008, many people were paying down interest only. And their payments were increasing without fixed-rate loans.

Will the Market Crash?

Because the market is doing so well right now, it is possible there will be a market correction. But will there be a 50% crash? That seems unlikely given the safeties that are currently in place with the mortgage industry.

Of course, we can’t see the future. But if we look at the difference between now and the state of the mortgage industry before the last big crash, we seem to be in much better shape. If you are in Temecula and have questions about whether now is still the right time to buy, contact me today. I am available to chat through text, phone, or email at (951) 473-0390 or [email protected].