Three big ways the housing market is different now than when it began to decline in 2006 and 2007 and bottomed out in 2012.
- Lending requirements are more strict now. Lenders have become much more risk-averse, especially during the pandemic. This is good for the housing market and means people aren’t buying homes they won’t be able to afford.
- There are fewer adjustable rate mortgages out there. There was a slight uptick in people who got ARMs a few years ago, but since rates have been so low, not as many people have adjustable rate mortgages. A rise in mortgage interest rates won’t affect people who own homes like it did back then, when people suddenly couldn’t afford the homes they were living in. (In fact, interest rates in 2007 and 2008 and were above 6%, quite a bit higher than now.)
- Homeowners are more liquid now than they were then. Homeowners have more equity in their homes, so there’s less chance they’ll owe more than their homes are worth and rush to sell.