There are several reasons why the 2008 Housing Crisis will not repeat itself. In this video, we discuss 5 key reasons why it won’t happen again.
#1 – Full Documentation
When the housing bubble burst in 2008, one of the main contributors was “Stated Income” customers that were given loans based on what they stated as their income, assets, bank statements and taxes. Which led to people getting into homes they could not afford.
In today’s market, the requirements are much more strict. With Lenders requiring “Full Documentation” which included: Bank Statements, Paystubs, documentation of assets and tax returns.
#2 – Credit Scores
Back in 2008, the average home-buying credit score was below prime, in what we call subprime credit which around 580. With sub-prime credit it usually indicated that the buyer was not financially stable to handle a long term mortgage.
Today the average credit score is over 700 which is in the prime category for lending. With having full documentation required and a great credit score both parties have greater confidence in the long term investment of owning a home.
#3 – Government Regulation
In 2008, there were no regulations in place for “poor credit” or “subprime lending”. There were several institutions that went bankrupt including the insurance giant AIG. Their downfall was investing in subprime lending. When the housing bubble burst their so-called assets were now liabilities.
With today’s market, the Government has put regulations in place to avoid the 2008 Housing crisis from happening again.
#4 – Learning from our Mistakes
With the 2008 housing crisis still very recent in everyone’s mind, people in general, have learned from the mistakes that we made in the past. Having a stronger financial foundation and making better decisions ultimately has pushed the economy into now it’s 7th year of positive growth.
#5 – A Strong Foundation
In a combination of the first 4 reasons history won’t repeat itself, reason number 5 is a strong foundation with every piece we mentioned before to strengthen the housing market and the economy.