Housing prices have continued to increase over the past year, and some economists wonder if another housing bubble is around the corner. In 2007, after years of inflated housing prices and a building boom, the bubble burst abruptly, leading homes to lose about 26% of their value, inciting the Great Recession, and destroying household wealth nearly overnight.
Why Some Economists Believe the Housing Market Won't Crash this Time
Many economists who lived through the Great Recession of 2007 believe that we won't see another crash because the underwriting standards for home loans are much stricter today than they were back then. In fact, most lenders have reinforced their mortgage initiation process, which includes a better assessment of collateral and improving underwriting procedures before confirming mortgages.
Additionally, the Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) requires that creditors make good faith decisions about whether a home buyer will be able to repay their mortgage loan according to the terms it has set forth. And, there's doesn't seem to be an excess of housing inventory like there was in 2007. Though, even if there was, economists do not believe it would cause a crash either.
What Does it all Mean?
Despite the PTSD and fear many economists have from the 2007 housing crash, the consensus seems to be that the fragility of the housing market will not be quite as dramatic this time. Yes, the prices are unsustainable, overvalued, and vulnerable to rising mortgage rates, but a crash is unlikely.
Get Professional Assistance
If you are a current homeowner trying to decide if now is the time to sell your home, it might be. That is, if you can make enough of a profit to afford another home right away. With vacancy rates across the country the lowest they've been in a while, an unending pandemic, and the Great Resignation occurring right now, the decision can feel overwhelming. Working with a real estate attorney will ensure you are given the best advice for your particular situation.
To schedule a consultation with an experienced attorney at The Law Offices of Melvin Monachan, call us at (347) 389-1682 or contact us online.
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