In last week’s article, we discussed whether or not right now is the best time to flip a house. And in this week’s article, we are going to discuss if you should wait until home prices drop to purchase a home. We will be referencing this article from Yahoo! Finance.
In the last two years, this world has gone through some crazy changes, and the real estate market is no exception. Between record-setting inflation and record-setting interest rates, a housing crash surely is on the horizon…right?
Those of us that lived through the 2008 crisis might be keeping a keen eye on this market that’s starting to cool off and for these prospective homeowners, it might be most appealing to put your home buying plans on hold until the market falls so they can grab a house at a great price.
But a lot of experts predict that there are good reasons to believe that wherever the market ends up, it won’t be a return to 2008 — which will no doubt be a relief to anyone that lived through our last crises.
So, here are three simple reasons this housing downturn is nothing like what we experienced in 2008.
1. Lenders Are Less Lenient
A huge contributor to the housing crisis in 2008 was uncertain lending practices within the financial industry. Years of deregulation made it easier — and more profitable — to hand out risky loans. Luckily, The Dodd-Frank Act, which was signed into law in 2010 aimed to prevent that by increasing oversight in the industry.
While the act’s effectiveness has been called into question over the years, it has definitely forced lenders to be stricter about their lending practices, which means far fewer borrowers are likely to land in hot water.
2. Homeowners Are Doing Fine
The onset of the COVID-19 pandemic could have been catastrophic for the housing market if millions of homeowners had no choice but to default on their loans.
Fortunately, certain mortgage programs were put into place to allow struggling borrowers to pause their payments until they could get back on their feet.
The best part about those programs?
They worked!
By the end of March, the share of mortgage balances 90-plus days past due remained at 0.5% — a historic low.
On top of that, the rising home prices have translated into increased equity for homeowners.
3. There’s Still Plenty of Supply
A major issue in 2008 was the tremendous oversupply due to foreclosures, making the market freeze.
Comparatively, now we see a massive demand and a shortage of supply, but the Fed’s efforts to cut demand by raising interest rates is starting to work as new housing is slowly coming back onto the market.
So, if you’re wondering whether or not right now is the best time to buy a home, remember that although there are some similarities, we are not in a repeat of 2008.
