One of the most common questions I receive from my clients these days is: “Will there be a market crash?” I think this is a natural concern based on buyer concerns that they may be purchasing at the top of the market; as well as from sellers who wonder if they need to sell now before the market changes drastically. Also, with forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like what happened after the housing bubble 15 years ago.
Here are four reasons why that won’t happen.
Fewer Homeowners In Trouble
After the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they simply walked away and gave it back to the bank. Many of these homeowners were in this position because they probably couldn’t really afford their homes in the first place, but due to the bank’s faulty loan practices, they became owners with little to no money down and no equity in their homes. As of last Friday, the total number of mortgages still in forbearance stood at 1,863,000.
Homeowners in Forbearance Have Equity In Their Homes
Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity in their homes. That’s important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create.
The Market Can Handle New Listings
When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a 9-month supply of listings for sale. Today, there’s less than 3 months of inventory on the market. Even if those in forbearance do need to sell, there won’t be a flood of new inventory on the market.
Government and the Banks Want to Keep People In Their Homes
The White House released a fact sheet in late July explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance.
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