Our Current Market vs. the Crash of 2008
Here’s why the real estate market won’t be crashing anytime soon.
I’ve been getting a ton of questions about the current state of the market lately, and the question of when the housing market is going to crash is chief among them. In fact, in terms of Google searches, the number of times that question has been asked has risen by 2,450%! Many of us remember the crash we experienced back in 2008 and the so-called bubble that preceded it. So how is today’s home price surge different from what happened back then?
Two key factors led to the Great Recession which are not present in today’s market:
1. The types of loans that were being approved. You may have heard of subprime loans, called ‘liar loans’ by some lenders. Back during the crash, many people who should never have been able to qualify for a loan were getting approved not just for one home but for multiple properties. When people couldn’t pay back their loans, that created a financial disaster.
2. How appraisals were taken care of. Back in those days, lenders could order appraisals directly, even from their friends.
Today’s market is better protected by all the safeguards that were put in place as a result of the crash. Now, the types of loans that are available and the qualifications that applicants must meet to be approved have become much stricter. Lenders can no longer order appraisals directly, either; they must order them through an appraisal management company.
So when is the market going to crash? There may be a market correction at some point where the craziness of our current market may slow down, but I don’t believe it’s going to crash anytime soon.
If you have any questions about buying and selling homes or the market in general, don’t hesitate to reach out to us. We’d be happy to answer any questions you have.