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Anyone who’s bought a home, or even thought about it, in the past fifteen years probably remembers the devastating effects of the housing bubble crash and subsequent foreclosure crisis that predicated 2009’s Great Recession.
“People who couldn’t pay their mortgages lost more than 6 million houses, adding extra inventory to a market when unemployment negatively impacted demand,” said Bruce Mohr, senior investment advisor, and credit consultant at Fair Credit.
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With the housing market running hot even through the pandemic, many people have become concerned that we’re in another housing bubble, and fear that another crash could follow. We spoke to real estate and finance experts who explain why we are not, in fact, in a housing bubble.
Mortgage Lending Requirements Are Substantially Stricter
One of the factors that led to the last bubble and then crash, Mohr explained, was mortgage lenders making a lot of sketchy loans to people who really shouldn’t have received them. He said, “It is safe to conclude that mortgage lenders have learned from the 2008 financial crisis because they are no longer making impulsive loan decisions. Getting pre-qualified for a mortgage or getting accepted after you’ve selected a home is harder.”
Alex Byder, owner of BD Home Holdings, LLC, explained further, “Adjustable-rate loans are one of the most common ways to enter a housing bubble. When rates of these mortgages inevitably increase, people are forced to pay a much higher mortgage than they anticipated. However, only 0.1% of mortgages right now are adjustable (compared to over 50% in 2008).
He said that lenders make considerable efforts to ensure buyers are eligible for a mortgage, looking into your