Don’t Fear the Market (Q1 2019)

With the market changes that have been occurring lately, some Hoosier’s have voiced concerns that we may be headed towards another housing market crash. Let’s take this as an opportunity to see how our current market differs from the bubble a little more than a decade ago.

There are many ways one can assess the market, but today let’s focus on a few comparisons from today’s market with that over a little over a decade ago.

Home Prices, Mortgage Standards, and Foreclosure rates are the metrics we will be looking at.

Home Prices

From 2008-2011 we saw a dramatic depreciation in the market, seeing homes lose approximately 29% of their value. Today we aren’t seeing depreciation. We are however seeing a deceleration of our annual rate of appreciation. It is safe to say we most likely will not see the 6-7% growth we have the last few years, but we will see rates slow down to around 4% as we saw last year.

Check out the Home Price Expectation Survey to see more of what experts are saying if you are someone who likes reading data & the specifics.

Mortgage Standards

Many have voiced concern about the easing of some of the more rigid lending regulations. They fear easing these standards could lead to another housing bubble caused by similar lax standards. The reality is that standards are far from being lenient in the same way they were during the housing crash, and that’s great news.

Published In their January Housing Credit Availability Index, The Urban Institute’s Housing Finance Policy Center found that “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.”

The HCAI is a measurement of how likely home purchase loans that are to default. A lower HCAI means that lenders want to avoid defaults, and impose tougher standards. A higher HCAI means lenders are willing to both tolerate and take more risks, making a loan easier to get.

Foreclosure Inventory

Since the housing crash a decade ago, around 35% of all homes sales where distressed properties (Meaning short sales & foreclosures). Last week the Mortgage Bankers’ Association revealed that “This was the lowest foreclosure inventory rate since the first quarter of 1996” and that “The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent”

Bottom Line

Based on the information coming out today, we can take a look and see the vast difference between the crash a decade and our current conditions. The market is always moving, and whether you are buying, selling or investing, it’s important to stay on top of market conditions.