When trying to predict whether the current housing market will crash, it’s important to look to the past. The 2008 housing crisis can be very informative to know whether our current market will crash. In this blog, we’ll talk about understanding the 2008 housing market crisis.
When most people think about the 2008 housing crisis, they think about the overvaluation of homes and the subprime mortgage crisis. While those were both big factors, there was more to it than that. To understand whether our current market is at risk of a crash, we have to understand all the factors that went into the last one.
The first factor leading to the 2008 housing crisis was the mass production of homes by builders. Initially this led to a balanced, dynamic market with plenty of choices for buyers. However, it ultimately led to an oversupply of housing which is one of the key factors that can cause prices to crash.
Another big factor was bad lending practices, such as the option arm loan. These loans were often given to people who couldn’t afford them, and they almost guaranteed foreclosures. This put even more homes on the market and made it harder for people to get mortgages.
The final factor was the mortgage companies themselves going bankrupt. This meant that they couldn’t provide mortgages, even to qualified buyers. This lack of demand coupled with an oversupply of housing is a big factor that led to the 2008 housing crisis.