The foreclosure crisis of 2008 was a catastrophic event that shook the world’s financial markets to their core. Millions of Americans lost their homes, and the effects of the crisis were felt for years afterward. However, despite some similarities between the current housing market and the one that existed in 2008, today’s foreclosure numbers are not even close to those of 2008. In this blog, we will explore why.
- Stronger Lending Standards
One of the major reasons that foreclosure numbers are much lower today is due to the fact that lending standards are much stronger than they were in 2008. Lenders are now required to verify income, employment, and assets before approving a loan. They also have to ensure that borrowers can afford to repay the loan. As a result, borrowers are less likely to default on their loans, which reduces the likelihood of foreclosure.
- Higher Equity Levels
Another reason why foreclosure numbers are low today is due to higher levels of home equity. According to the Federal Reserve, homeowners now have more equity in their homes than at any other time in history. This means that homeowners are less likely to default on their loans, as they have a greater financial stake in their property.
- Low Interest Rates
Low-interest rates have also played a significant role in keeping foreclosure numbers low. Since interest rates are low, homeowners can refinance their mortgages at a lower rate, which can lower their monthly mortgage payments. This can make it easier for homeowners to keep up with their payments and avoid foreclosure.
- Government Intervention
The government has also taken steps to prevent another foreclosure crisis from occurring. For example, the CARES Act provided homeowners with mortgage forbearance options, which allowed them to temporarily pause their mortgage payments during the pandemic. This helped prevent foreclosures, as struggling homeowners were given time to get back on their feet.
- Strong Housing Market
Finally, the strong housing market has also contributed to low foreclosure numbers. Home prices have been steadily increasing over the past few years, which means that homeowners who fall behind on their mortgage payments can sell their homes and avoid foreclosure. This is in contrast to the 2008 housing market crash, where many homeowners were stuck with homes that were worth less than their mortgage payments.
In conclusion, while there are certainly some similarities between the current housing market and the one that existed in 2008, foreclosure numbers are nothing like they were back then. Stronger lending standards, higher equity levels, low-interest rates, government intervention, and a strong housing market have all contributed to the low foreclosure numbers we see today. While there may be bumps in the road ahead, it is unlikely that we will see another foreclosure crisis on the scale of 2008 anytime soon.