In the current climate, some have sounded the alarm, asserting that the housing market may be teetering on the brink of a downturn due to the strain from high interest rates and a weakening economy. Nevertheless, grounds for optimism exist despite immediate challenges, as household balance sheets are in robust condition.
It’s adequate to quell the fears of doomsayers envisioning a housing crash comparable to the 2008 financial crisis and the subsequent Great Recession. While economic headwinds have begun to impact the financial stability of renters, younger individuals, and those with lower FICO scores, there is no sign of distress among homeowners.
In reality, rates of bankruptcy and foreclosure have remained minimal, even subsequent to the expiration of the CARES Act moratorium. This contrasts with the aftermath of the Great Recession, when numerous households were excessively leveraged, and escalating rates triggered a surge in foreclosures. Another key distinction is that regulatory measures have led to elevated lending standards and the disappearance of unconventional mortgages.
Subsequent to the housing crisis, the majority of buyers gravitated towards 30-year fixed mortgages. Periods of remarkably accommodative monetary policy also drove substantial waves of refinancing. Collectively, this implies that the vast majority of households continue to benefit from low rates and have experienced an upturn in the value of their homes.
Finsum: In the current environment, inflation and higher rates have inflicted hardship on specific population segments. However, homeowners stand as a deviation, having locked in low rates while demonstrating scant signs of strain.
- real estate
- macro
- rates
- Mortgages
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