Housing market and economy are markedly different from the 2008 financial crisis.

Sharply rising mortgage rates, a steep decline in home sales and a record price slowdown have raised concerns that the housing market could crash. But experts argue that these market trends are a symptom of a correction after two years of massive growth and several key elements present during the 2008 housing crash are missing in today’s current economic climate. Experts say the housing market and the larger economy are markedly different from the 2008 financial crisis, when the housing bubble burst. “At that time there was a glut of housing inventory. Overbuilding had taken place – too much home construction relative to household formations,” Robert Dietz, chief economist for the National Association of Homebuilders, told The Hill. 

“You had a lot of risky mortgage underwriting that put us in a position that when home price declines occurred and then ultimately combined with a rising unemployment rate [there were] lots of underwater mortgages and rising foreclosure rates, and it took some time for the housing glut to be reduced,” Dietz said. The housing glut was followed by close to a decade of underbuilding that contributed to a shortage of at least one million homes today. This was exacerbated by millennials coming of age near the end of this period of underproduction. Millennials’ ongoing needs could also put a floor on prices, Yelena Maleyev, an economist with KPMG Economics, told The Hill. “Millennials are going to continue aging into their prime home buying years. We’ve had household formation outpacing new building for many years now,” Maleyev said. Economists expect further declines in the housing market, but Dietz said the numbers should be put into context.

Source: The Hill