3 Reasons Why We Are Not Heading to Another Housing Crisis

Reprinted from Keeping Current Matters

3 Reasons Why We Are Not Heading Toward Another Housing Crash

With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.

Here are three key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates

HOME PRICES

A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.

Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.

MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Last month, their January Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

FORECLOSURE INVENTORY

Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:

“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”

Bottom Line

After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.


About marilynsellshollisterrealestate

I am a native Californian born in Los Angeles and have resided in San Benito County since January 30, 1959. I attended the University of Southern California. I am a licensed Real Estate Broker, license #00409787, active for almost 45 years. I started my career in 1972 and still am totally committed to the highest level of service to my clients. I am currently associated with Intero Real Estate Services. I am Past President of the San Benito Association of Realtors, serving in the role on numerous occasions. I was a Director of the California Association of Realtors for over 18 years, having served on numerous committees. I also served 2 terms representing the California Association of Realtors at the National level, NAR. I am a certified SRES (Senior Real Estate specialist), since 2005. My community involvement has included membership in the Hollister Rotary Club, serving as their first woman President in 2002. In the late 1960's, I became a member of the El Torillo Chapter of Children's Home Society, and served as President, and was also President of the Tri-County Council of CHS, which is today Kinship Center, and I am currently a Senior Active. I am a member of the San Benito Chamber of Commerce. From 2002-2008, I served on the Board of the Hollister Downtown Association and was their President from 2006-2007, and still serve on sub-committees of this organization. And, I am currently serving my 3rd term on the Community Foundation. My record of performance and my reputation have made me who I am in the industry. I am a household name in San Benito County, when you think of Real Estate. My name is recognized not only in Hollister, but in our neighboring counties, Monterey, Santa Cruz and Santa Clara counties. I have been involved in land development, marketed several subdivisions, sold ranches, commercial leasing, bank-owned properties, short sales and own a Property Management Company, Hollister Rental Properties, for more than 35 years. I am proud of my sales record and for the majority of my career I have been in the top 1% of major Real Estate Companies including Van Vleck Realtors, Cornish and Carey, Contempo, Seville-Contempo, Century 21, Coldwell Banker and finally Intero Real Estate services for the last 15 years. Using my skills in negotiating, mediation and transaction closure, during 2010 and 2011, I was involved with the City of Hollister's First Time Home Buyer Down Payment Assistance Program. The program was the City's Redevelopment Agency, under Bill Avera, with the assistance of CJ Valenzuela who was working with the County of San Benito. CHISPA, a non-profit, was responsible for restoring homes to equal to new condition that the City had taken back in foreclosure, or that they had acquired. When the homes were restored, we put them on the Multiple Listing Service and we went out and promoted the City's Down Payment Assistance Program. Buyers were screened and qualified by our preferred lenders. I facilitated workshops for First Time Buyers explaining the programs. I negotiated the contracts for the City of Hollister and with the Buyers. With this program, I closed 2 homes in 2010, and 4 homes in 2011. On a personal note, I am married to Richard Ferreira, a retired General Contractor/Developer. We have a combined family of six daughters, six grandsons and 3 granddaughters. We share commons interests in travel, movies, entertaining, and Richard has picked up my love of cooking. Our spare time is spent with family and enjoying our grandchildren.
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