Are We Headed Toward Another Housing Bubble?

Real Estate

With houses sitting on the market a little longer than they were a couple of years ago, some may begin to wonder if we’re headed toward another housing crash. The answer quite simply put, no. The market today is very different than it was 12 years ago, and here’s why.

Home Prices

In the housing crash of 2008, home prices depreciated dramatically, and on average, houses lost about 29% of their value between 2008 and 2011. In today's real estate market, home prices are not depreciating; they're just leveling out.

While home prices are no longer appreciating at a rate of 6-7 percent, they are continuing to rise by at least 4% over the last year. In the Home Price Expectation Survey, 100 experts were asked if home appreciation would continue through 2019, 94 said yes, just at a slower rate.

Mortgage Standards

While some may believe that mortgage companies are beginning to ease their standard of loaning which could potentially create another bubble, there is proof that they are not 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."

In their January Housing Credit Availability Index, we learned –

"Significant space remains to safely expand the credit box. If the current default risk were doubled across all channels, the 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

Over the last decade, foreclosed and short sale properties only made up 35% of all the home sales. According to the Mortgage Bankers' Association, the percentage of loans in the foreclosure process at the end of the fourth quarter was less than 1%, which is the lowest foreclosure inventory rate since the first quarter of 1996.

So, as you can see, even though home appreciation has slowed down, that doesn’t mean we’re headed for another crash. If the fear of a market crash has held you back from purchasing your next Dallas home, now may be the time to reconsider.



*Data for this blog was collected through Keeping Current Matters.