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Bubble or No Bubble? What History Tells Us About the Likelihood of a Housing Crash This Year

Bubble or No Bubble? What History Tells Us About the Likelihood of a Housing Crash This Year

June 21, 2022 By David Banks Leave a Comment

In a recent Gallup poll, only 30% of respondents said it was a good time to buy a house. Concerns about a housing bubble are rising. However, comparisons to the 2008 collapse reveal many differences. In 2008, deregulation lead to subprime borrowers buying adjustable-rate mortgages that ended up becoming unaffordable. Today, ARMs are regulated to prevent the same problem from reoccurring. One expert compares today’s market to that of 1979-1982. Then, inflation was high, and the Fed responded by raising interest rates and causing mortgage rates to rise. In contrast to 2008, today’s housing market bubble is driven at least partly by Millennials desire to buy homes. This desire will boost demand and keep prices from dramatically falling. Additionally, increases in home equity makes people better equipped to withstand decreases in home prices. Instead of seeing the current market as a bubble that is bursting, some experts see it as simply a cooling down of the housing market.

Key Takeaways:

  • The 2008 crash was influenced by subprime borrowers and ARMs which are better regulated today.
  • One expert compares today’s situation to the 1979-1982 housing market, which was caused by the Fed’s response to high inflation.
  • Millennials buying homes has driven demand, and this demand should prevent prices from crashing.

“However, those worried about a 2008-style housing bubble may be better served looking further back in time for how today’s market may play out.”

Read more: https://money.com/housing-crash-housing-bubble-history/

Related posts:

  1. Pre-Qualified vs. Pre-Approved: What’s the Difference?
  2. The biggest mistakes home buyers make in a seller’s market
  3. 7 Bidding War Mistakes Today’s Homebuyers Are Making in Droves
  4. First-Time Homebuyers are Driving the Market Forward

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