8NOVEMBER 2024OPINIONIN MYBy Jason Obradovich, Chief Investment Officer, New American FundingCOMPARING THE HOUSING MARKET IN 2008 VS. TODAY - ARE HOME PRICES ABOUT TO COLLAPSE?As the current housing market continues to experience rapid appreciation for several straight years, even in spite of rising rates, is the market poised to collapse as it did during the Financial Crisis? Have the lessons from the Great Recession been addressed, or are we doomed to repeat history?To answer these important questions, let's first look at the fundamental flaws of the last housing recession. The U.S. housing market in 2008 was a tale of two sides. On the one hand, it was booming, with home prices soaring to new heights, a market brimming with confidence. Yet, on the other hand, there were increasing foreclosures and defaults due to borrowers being coerced into risky loan products, being approved for loans that they could not qualify for, and a capital markets liquidity system that did not identify any of the risks appropriately. It truly was a house of cards that came crashing down the moment delinquencies began to rise, and the rest was history.In the Wake of the CollapseSince the crash of 2008, there have been several changes to home buying that are worth noting that have helped ensure a crisis of this magnitude could never happen again. Regulatory changes were enacted that required lenders to properly document and qualify borrowers to afford the mortgage they applied for. Part of those qualification standards was ensuring there is proper documentation of income and assets, along with adding layers of risk protection for loans with fluctuations in interest rates and payment changes. Additionally, loan officer compensation was completely overhauled to address the steering of borrowers to loan products that were not in their best interests. Jason ObradovichThe recent runup in housing prices is a combination of a lot of factors, none of which are similar to the market before 2008
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