How Today's Housing Market Differs From Before the 2008 Crash

How Today's, Housing Market Differs , From Before the 2008 Crash.

High mortgage rates, record inflation and soaring house prices have all contributed to fears that the housing market is heading for a crash.

'Newsweek' reports that there are some important differences between the current market and the market heading into the 2008 housing crisis.

According to some experts, one of the main differences is current underwriting standards.

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During the crisis, there was minimal verification of a borrower's income which led to the prevalence of stated income loans, Ryan O'Loughlin, senior director in Fitch Ratings' RMBS group, via 'Newsweek'.

In today's environment, the verification of the actual income and assets is much more rigorous and has to maintain certain thresholds, Ryan O'Loughlin, senior director in Fitch Ratings' RMBS group, via 'Newsweek'.

According to 'Newsweek,' another major contributing factor to the 2008 crash was "teaser rates.".

During the GFC [Great Financial Crisis], borrowers typically had a much lower payment for the first number of pay periods and then had the payment reset to a higher value, Ryan O'Loughlin, senior director in Fitch Ratings' RMBS group, via 'Newsweek'.

This could have been done through interest-only features or artificially low initial interest rates, Ryan O'Loughlin, senior director in Fitch Ratings' RMBS group, via 'Newsweek'.

'Newsweek' reports that a third difference is that there is now a "record amount" of equity in the market due to substantial gains in home prices.

The amount of borrower equity during the GFC was substantially less than today and when borrowers defaulted, there were forced sales and massive losses, Ryan O'Loughlin, senior director in Fitch Ratings' RMBS group, via 'Newsweek'