GREENSBORO, N.C. – Apr 10, 2019 – Research on how past recessions affected home values shows current conditions – including a shortfall in housing construction – likely mean the next recession will have a less severe impact on housing than the recession in 2008 did, according to the spring edition of The Housing and Mortgage Market Review (HaMMR) by Arch Mortgage Insurance Company.
Housing market trends are now nearly the complete opposite of conditions in the months prior to the Great Recession, according to Dr. Ralph G. DeFranco, global chief economist for Arch Capital Services.
“A recession is inevitable at some point, but it’s likely to be far less severe for the housing market than the Great Recession,” DeFranco says. “We estimate that the current market is underbuilt by 1 million or more homes, buyers are more cautious and loan quality is far higher. In 2007, conditions were completely flipped: housing was hugely overbuilt, speculative demand was off the charts and the market was awash with high-risk loan products.”
DeFranco also notes that home prices were overvalued by 25 percent or more then and are closer to expected values now.
Source: © 2019 Florida Realtors®