Autopsy of a Dead Real Estate Market

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Ben performs an autopsy the 2007-8 housing crash, looking specifically at four important elements and asking, will it happen again?

Lending Practices

Leading up to the housing collapse of 2008, buyers saw a good faith estimate of their loan costs and a Truth in Lending statement, but many did not understand the terms of their loan. Appraisers during that time report that lenders pressured them to increase home values to hit targets, artificially inflating values. (Center for Public Integrity)

"Post-crash, reforms by the Consumer Financial Protection Bureau under the “Know Before You Owe” umbrella meant to create greater transparency include a three-page Loan Estimate that shows whether buyers face a balloon payment or a possible increase in their mortgage rate as well as a Closing Disclosure that combines the former closing documents into one more user-friendly version." (Washington Post)

Interest Rates

This year's repeated rate hikes have brought us to the highest point since 2008, but in the 1980's, mortgage rates soared to 18% as the Fed attempted to quell inflation. High rates make it harder for borrowers to own a home, but they are not harbingers of a crash and Ben doesn't see home prices dropping significantly any time soon.

Home Prices

Housing prices skyrocketed in the early 2000's, and buyers weren't bringing cash to the table. Inflated values meant many borrowers defaulted on their loans. The cost of existing homes has risen steadily for months now, but because of better regulation, a home must appraise, or buyers bring cash to pay the difference between the loan and appraisal amounts. Rising home prices take some buyers out of the market, but those who remain are signing mortgage agreements they will be able to pay.

Loan Type

In 2005, 30% of U.S. mortgages were adjustable-rate loans (ARM), exposing many borrowers to risk once interest rates began rising. The 2022 ARM market share was just 10%. (The Mortgage Reports) Fixed rate mortgages are more secure and especially for longer loans like 20- and 30-year terms, more affordable. With a fixed rate loan, payments can rise only nominally due to increases in insurance and taxes.

The Forecast

In Jackson, Michigan, the number of showings and listings are down, indicating a slowing market. Existing home prices have leveled off, but because the market is not flooded with listings, prices are not expected to drop. Due to interest rates and inflation, Ben expects fewer buyers going into 2023 than during the first half of 2022. To buy or sell comfortably and securely, be sure to work with a REALTOR® who is familiar with the ebbs and flows of the local market. If you have questions, or if you're thinking of buying or selling, give us a call.

To help you make the most money when you sell, download our FREE Expert Home Selling Guide. It's an extensive list of improvements that attract buyers, and a list of things you can skip doing. Your home is unique, so you can also schedule a consultation with one of our listing specialists at for a customized home selling plan.

Works cited

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