A lot of parallels have been drawn to 2008 especially since the housing market has gotten so hot, all over the country too!
We don't believe we're in any sort of bubble like we were in the past and I'll also share some personal perspective and thoughts on this market.
Here are some very big differences we see today:
1. There is very limited supply and very high demand in the real estate market today. In 2008 there was a much greater supply of homes available.
2. Average down payments today are significantly higher than the average down payment was in 2008.
3. Conventional (considered safer) financing has increased since the pandemic vs a glut of non-conventional mortgages in 2008.
4. Stricter mortgage qualifications. It's much more difficult to be approved for a loan today that it was in 2008. This protects against the risk of poorly qualified borrowers defaulting.
There is also tremendous equity appreciation in the market today. Unlike in 2008 in which people had little to no equity reserves available if they were behind on payments, today, many borrowers in forbearance or behind on payments still have equity positions in their homes. This may allow distressed borrowers to sell and still make money off the sale of their home vs a short sale or full blown foreclosure.
With this in mind we feel strongly that the market is not likely to correct like it did in 2008. However, if you're in retirement and are concerned about your mortgage payments, a reverse mortgage may be a great fit to extinguish a large monthly bill and secure your retirement for years to come.
