1. Lenders stopped being so lax

Blame it on the banks. A huge contributor to the housing crisis in 2008 was dicey lending practices within the financial industry. Years of deregulation made it easier — and more profitable — to hand out risky loans.

The Dodd-Frank Act, which was signed into law in 2010 aimed to prevent that by increasing oversight in the industry.

While the act’s effectiveness has been called into question over the years, it has undoubtedly forced lenders to be stricter about their lending practices, which means far fewer borrowers are likely to land in hot water.

The median credit score of newly originated mortgages was 776 in the first quarter of the year, according to the Federal Reserve Bank of New York. But nearly 70% of new mortgage holders had a credit score of 760 or more.

The New York Fed added in its quarterly analysis that, “credit scores on newly originated mortgages remain very high and reflect continuing high lending standards.”

2. Homeowners are doing fine

The onset of the pandemic could have been catastrophic for the housing market if millions of homeowners had no choice but to default on their loans.

Fortunately, mortgage forbearance programs allowed struggling borrowers to pause their payments until they could get back on their feet. And it worked: by the end of March, the share of mortgage balances 90-plus days past due remained at 0.5% — a historic low.

And compared to 2010, when delinquencies on single-family homes hit a 30-year high of 11.36%, the rate was just 2.13% in the first quarter of 2022.

On top of that, rising home prices has translated into increased equity for homeowners. In total, mortgage holders now have $2.8 trillion more in tappable equity compared to a year before, according to Black Knight, a mortgage technology and data provider. That’s a 34% increase and more than $207,000 in additional available equity per borrower.

3. There’s still plenty of supply

“It’s not always as simple as supply and demand — but it almost always is,” host Dave Ramsey said on The Ramsey Show earlier this month.

Ramsey says the major issue in 2008 was there was a “tremendous oversupply because foreclosures went everywhere and the market just froze.” The crisis wasn’t down to the economy or interest rates, it was “a real estate panic.”

In comparison, now, there’s a huge demand and a shortage of supply. But the Federal Reserve’s efforts to dampen demand by raising interest rates is starting to work. And new housing is starting to slowly come on the market as well.

What Ramsey says we’re seeing now is a softening in the rate of increase of prices, but he doesn’t anticipate they’ll go down like they did in 2008.

About the Author

Sigrid Forberg

Sigrid Forberg

Reporter

Sigrid is a reporter with MoneyWise. Before joining the team, she worked for a B2B publication in the hardware and home improvement industry and ran an internal employee magazine for the federal government. As a graduate of the Carleton University Journalism program, she takes pride in telling informative, engaging and compelling stories.

What to Read Next

How to Score One of Those Super-Low Mortgage Rates for Your Refinance

Here are six tips for landing the lowest rate that will save you the most money.

How to find the best 30-year fixed mortgage rates

These tips will help you score a good deal on the most popular type of home loan.