Many home buyers are on the fence right now about whether or not this year is the right year to buy a new home. Who can blame them? Recent events have shown that stranger things are no longer the exception.
Most of them are hesitant because of what’s happening due to the pandemic. Some potential home buyers are frequently asking if the housing market will crash like it did in 2008.
Buying a home is a huge responsibility, and it entails a lot of money. So it’s understandable that homebuyers are being cautious when it comes to taking out a mortgage to buy a home, given the situation we are in right now. Given the uncertainty that Covid-19 has brought, people can’t help wondering if we’re in for another housing crash and what to do about it.
Samantha Outlaw of Reach Home Loans, one of Florida’s leading lending agencies, shares her professional insight concerning the effect of Covid-19 on the housing market. She’ll also answer every homebuyer’s question right now, which is whether there’ll be another housing market crash like the one in 2008.
There’s a reason why the 2008 house market crash is still etched in almost everyone’s minds. The grim realization that you could lose your home in an instant is enough to scare most people. However, unlike what happened back in 2008, homeowners today have equity in their homes. And that’s one reason why a housing market crash is unlikely to happen.
“But the fear of this big reckoning that’s coming due to the forbearances and the pandemic, we just don’t see that happening. There are a lot of people who have equity in their homes. And that’s the big difference from what happened in the past.”
What happened in the crash of 2008 was that many borrowers were underwater, and they couldn’t come out from under themselves. Though they’ve sold their houses, they still owe money to their lenders. In comparison, today’s housing market is far different, even though many people have lost their jobs or were furloughed due to the pandemic.
“So right now, what we’re seeing, some lenders are offering the option to tack it onto the end of your loan. So it’s almost like a silent second lien. It doesn’t negatively affect you in any way.”
Due to the Covid-19’s effect on many people’s livelihoods, most lenders offer an option where borrowers can have a silent second lien. You only owe that money back when you sell or refinance. As soon as borrowers opt-out and go back into paying their mortgage, they can go back to their normally scheduled payments.
“So they can take advantage of the low-interest rates. You make free on-time payments, you can refinance, and then it should balance back out.”
What makes the housing crash of 2008 less likely to happen today is that the loans taken out are procured using the correct process. The borrowers paid a downpayment, and their income was enough to pay back the loan. So it was more likely that they were able to keep paying their mortgage. And because of that, most borrowers today have equity that homeowners in 2008 didn’t have.
“And if you do really feel like it’s overwhelming and that the payments that you owe now are too much, you can sell. You can pay the money back to the lender, and then maybe get yourself into a home that’s more affordable.”
The fear that the housing market crash of 2008 is going to happen again is not only unfounded. It’s also crippling most potential home buyers from finally getting their dream home. It would be a waste of a great opportunity if buyers allow their fear and hesitancy to decide for them. Some of these reasons are they’ll be missing out on low-interest rates, and the housing inventory in Florida is continuously getting lower.