Google reported in early April that the search question “When is the housing market going to crash?” had spiked 2,450% within a 30 day span. “Why is the market so hot?” searches had doubled in just a week.
Another top search was, “How much over asking price should I offer on a home in 2021” which jumped 350% in that same week.
Is the housing market headed for a crash this summer? The flurry of activity naturally brings back not-so-positive thoughts of the last time we experienced a hot market way back in 2008, but the root causes that resulted in the last crash aren’t present in the current market. This leads top economists to believe a crash is not imminent.
Here are the top 3 reasons this time differs from
the last market surge:
- Qualified Buyers – One of the main differences between 2008 and the condition of the current market is loan standards. Foreclosure filings were at a 15 year low in February of 2020 before pandemic forbearance. And have continued to inch down this year.
- Down Payments – The average down payment in 2007 was 9%, with the typical current down payment at 15.9%. 45% of first time buyers financed 100% of their home in 2007, compared to 17% in 2020.
- Adjustable Rate Mortgages – In 2007 15% of all mortgages were adjustable or fixed-then adjustable, while in 2020 only 4% were adjustable.
With all this in mind, I think there are a couple factors that we need to keep in mind that could slow the current market.
A significant increase in interest rates – 1.5 – 2% increase to over 5%.
Forbearance – As of March, about 70% of the homeowners still in forbearance are not making any payments. However, even in the worst-case scenario researchers estimate only about 2.9% of all mortgage borrowers could end up in delinquency. That’s still much lower than the 6.3% delinquency rate seen in 2010 in the midst of the Great Recession. The good news is, this will perhaps not be the “wave” of foreclosures that some experts predicted would occur this fall, once these forbearance programs start to wind down.
For more information on the current state of the real estate market or to find out how much your home is worth visit the Jelmberg Team at www.jelmberg.team/market