At midnight on Monday, Sept. 15, 2008, Lehman Brothers filed what might become – and also be – the most significant bankruptcy proceedings in U.S. history. It had been a high-watermark of the Great Recession.And the impact it had on the real estate market was felt everywhere.
Today, ten years later, American financial and lending systems look vastly different, thanks to a certain extent to safe and sound lending and regulatory policy reforms, which the National Association of Realtors® (NAR) says it supported. A few of those regulatory changes include the Dodd-Frank financial reform law, Qualified Mortgage Ability to Repay rules, and newly adopted Subprime Lending Principles, and all of these NAR supported.
The economic chaos A decade later: Big adjustments to RE market
NAR cites these particular accomplishments
Advancing policies which may assist in preventing a repeat of the financial crisis. NAR specifically points to the American Recovery and Reinvestment Act of 2009, which gave first-time home-buyers a tax credit of $8,000 that proved hugely helpful to the real estate industry’s recovery.
NAR lobbied successfully to retain access for the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac in every communities throughout the crisis. FHA support was particularly critical, NAR says, since it guaranteed financing for countless American families when large financial institutions significantly limited market involvement.
In an attempt to free up capital for mortgages and keep rates of interest low, NAR supported the Federal Reserve’s ongoing program to obtain $1.25 trillion of Freddie Mac’s and Fannie Mae’s mortgage-backed securities.
Today, home prices have reached or near record highs in several markets, and mortgage default and foreclosure rates are at historic lows. Overall, as the nation’s home ownership rate continues to inch higher, the housing market has recovered from the financial crisis that began A decade ago.
Although some U.S. regions have experienced sales declines in recent months, NAR Chief Economist Lawrence Yun says concerns in regards to the housing market peak and possible slowdown are unfounded. He believes some of the nation’s most overheated real estate markets will notice sales slow in 2018, but says those are occurring as a result of insufficient supply and rapidly rising home prices – not weak buyer demand, a more reliable indicator of a true slowdown.
Yun refers to this as a far better problem to have versus a lack of demand, which remains high across much of the nation.
“Over the past 10 years, prudent policy reforms and consumer protections have strengthened lending standards and eliminated loose credit, as evidenced by the higher than normal credit scores of those who are able to obtain a mortgage and near record-low defaults and foreclosures, which contributed to the last recession,” says Yun. “Today, even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory and accompanying unsustainable home price increases.”
Inventory levels have fallen for 3 straight years, and multiple bidding is still prevalent on starter homes in numerous U.S. markets. Several of the nation’s hottest housing markets – cities like Seattle and Denver – are said to be slowing, but drops in homes sales are generally connected directly to supply shortages and corresponding price increases.
“The answer is to encourage builders to increase supply, and there is a good probability for solid home sales growth once the supply issue is addressed,” Yun says. “Additional inventory will also help contain rapid home price growth and open up the market to perspective home-buyers who are consequently – and increasingly – being priced out. In the end, slower price growth is healthier price growth.”
While home building increased 7.2% year-to-date to July, Yun contends that even more construction is required to fill national shortages. Some unavoidable barriers stand in the way, but more deliberate and well intentioned policy decisions will help alleviate the housing shortages facing markets throughout the country.
“Rising material costs and labor shortages do not help builders to be excited about business,” Yun says. “But the lumber tariff is a pure, unforced policy error that raises costs and limits job creations and more home building.”
Because of those headwinds, Yun forecasts existing-home sales in 2018 to decline 1.0 percent to 5.46 million – down from 5.51 million in 2017. Despite the expected reduction in sales in many markets, home price growth should remain strong in markets across the country and improve about 5% on a nationwide basis.
In 2019, with anticipated increase in inventory and moderate price growth, home sales should remain higher. Existing home sales are forecast to climb 2% in 2019, while home prices are predicted to rise by 3.5%, Yun says.
Have a questions or concern? Nick, Cindy & Nicholas Davis with RE/MAX Premier Group are here to assist you.
Need to speak with us now? We are always available at 813-300-7116, or click here and we will back in touch with you.
Ways Our Family Can Help Your Family
