Why the 2023 Housing Market Isn’t Deja Vu All Over Again

Dated: July 6 2023

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Worried about another housing crash? Here's the good news: today's market is not a replay of 2008. One big reason? The shift in lending standards. Let's explore this with some solid data.

Every month, the Mortgage Bankers Association (MBA) gives us the Mortgage Credit Availability Index (MCAI). This index is like a thermometer for mortgage health. The higher it is, the easier to get a mortgage. If it drops, getting a mortgage is tougher.

In 2004, the MCAI was at 400. By 2006, it was over 850. Today, it's different. Post-crash, stricter standards make mortgages harder to get.

Lax lending standards helped create the housing bubble. As Realtor.com puts it:

"In the early 2000s, it was easy to get a mortgage... many were given to people who couldn't afford homeownership."

The high peak in the graph indicates that pre-crisis, credit was easy to get, and loan requirements were lenient. Today, as per Bankrate:

"Lenders impose tough standards on borrowers... those getting a mortgage have excellent credit."

The MCAI has stayed low post-crash, indicating stricter standards. Joel Kan, VP and Deputy Chief Economist at MBA, confirms:

"Mortgage credit availability decreased for the third month... the MCAI is at its lowest level since January 2013."

This means we've moved away from risky lending practices that led to the 2008 crash.

In conclusion, today's tighter lending standards have reduced risk for lenders and borrowers. It's proof that this housing market is different from the last one. Rest assured, we're not reliving 2008.

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Shaun Radcliffe

Experience the 'Amazon-like' real estate service with Shaun! Embarking on a journey to redefine excellence in real estate, Shaun created Radcliffe & Associates with one vision in mind: to lea....

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