Hitting Home? What Housing Experts Are Saying

“This time, housing is a casualty of a public health crisis turned economic, not the cause of an economic crisis.”

– Mark Fleming, First American Financial Corporation Chief Economist

Depending on what you read, listen to and watch, predictions for the recovery from economic effects of pandemic containment measures run the gamut from dire to rosy. Americans are understandably anxious even if they’re not in one of the hardest-hit industries like hospitality. Though the country recovered from the downturn of the late 00s commonly referred to as “The Great Recession,” many suffered years-long effects of housing’s role in that crisis. Consumers can take solace in the fact that housing is not responsible for the current economic scenario; in fact, housing may help our country lift itself out of it. Here are three key differences between the housing market today and the years leading up to and during the Great Recession, according to First American Financial Corporation:

The housing market is not overvalued.

If housing is appropriately valued, house-buying power should equal or outpace the median sale price of a home. The only time period when the median sale price was greater than house-buying power was from 2005 through 2007, indicating an overvaluation of housing, or a “housing bubble.” Today, house-buying power is nearly twice as high as the median sale price of a home, implying that housing is not overvalued, and is in fact in a much better position entering this potential recession than it was ahead of the last.

The housing market is underbuilt.

Housing enters this potential recession underbuilt rather than overbuilt, a significant difference compared with the pre-Great Recession housing market. Housing demand has outstripped housing supply since 2009. In 2018 for example, 1.2 million households were formed, while only 860,000 units were produced, resulting in a shortage of 340,000 units. Prior to 2009, housing supply significantly outpaced demand.

Equity is at historic heights.

The U.S. household debt-to-income ratio is at a four-decade low and the market is not driven by liberal lending standards, subprime mortgages and highly leveraged homeowners. The housing crisis during the Great Recession was fueled heavily by the fact that job losses were paired with a significant share of homeowners who had little, if any, equity in their homes. Homeowners today have very high levels of tappable home equity, providing a cushion to withstand potential price declines.

What do the changing market conditions mean to you?

We’re here to help you with any questions you may have.

About Leader Bank

Leader Bank is the #1 home purchase lender among banks in MA for single family homes, multi-family homes, and condos.
Learn More About Leader Bank

Loan Resources

Whether you're buying your first home or your dream home, Leader Bank has a mortgage solution for you. Browse our selection of resources and tools to learn more.
View Loan Resources