Is Current Housing Market Slowdown Similar To 2008 Crash?

Is Current Housing Market Slowdown Similar To 2008 Crash?

Talia Kaplan


Is Current Housing Market Slowdown Similar To 2008 Crash?

National Housing Conference CEO David Dworkin stressed Monday that the current slowdown is “nothing like the last housing crisis,” arguing that “all the major fundamentals are very different.”

“The law of supply and demand is never repealed, so we have a very different situation where instead of having a demand-driven crisis, we’ve actually had a supply-driven crisis that has increased home values and home prices by a lot,” Dworkin told “Cavuto: Coast to Coast.” 

He noted that in 2008 the market “was fueled by toxic mortgages and people were getting interest rates on a teaser basis that they couldn’t possibly repay.” 

For months, the housing market was buoyed by record-low interest rates at the same time that American homebuyers – flush with stimulus cash and eager for more space during the pandemic – started flocking to the suburbs.

But the interest rate-sensitive sector has started to cool considerably as the Federal Reserve moves to tighten its policy at the fastest pace in three decades in order to bring persistent inflation under control. 

Policymakers already approved two consecutive 75-basis point rate increases in June and July and confirmed that another supersized hike is on the table in September.

Following the rate hikes, the average rate on a 30-year fixed mortgage – the most popular among new homeowners – climbed to nearly 6% in June, though they have since moderated. The average rate for a 30-year fixed rate mortgage hovered around 5.55% for the week ending Aug. 25, according to recent data from mortgage lender Freddie Mac.

That is significantly higher than just one year ago, when rates stood at 2.86%. 

Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market. 

A recent report from Redfin showed that home sale cancellations soared in July to another two-year high as buyers retreated from the market. About 63,000 home purchase agreements were called off in July, equal to 16% of homes that went into contract that month. 

“Certainly we’re looking at a slower period, but we still have a lot of need out there, and housing affordability is the worst it’s been in most people’s lifetime,” Dworkin noted. 

Earlier this month it was revealed that the national median single-family existing-home price rose 14.2% annually to $413,500, surpassing $400,000 for the first time, according to the National Association of Realtors. 

 “In markets where you’re going to continue to have a steady demand — Florida may be one of those — then you’re to going to see a much smoother recessionary impact, which I think is what we really are dealing with here,” Dworkin told host Neil Cavuto on Monday. 

“And you’re also going to see in many markets that have not seen a huge increase, but have kind of been pretty normal, you’re going to have them remain largely so.”

“In the most inflated markets you’re going to see prices come down, but I think because the demand is so high and supply is so short, we still are going to have a muted response,” he continued.

“Now, that’s a real problem for Chairman Powell, because one of the ways he controls inflation is by raising rates and if the supply remains out of match with demand, then the big tool in his toolbox is definitely blunted.”



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Should I Wait For Housing To Crash Further Before I Buy A House? 3 Reasons The End of 2022 Could Be The Very Best Time To Jump In

Prices falling in expensive cities

In two-thirds of major regional housing markets — 98 out of 148 — prices continue to drop, especially in more expensive locations.

We may see expensive markets fall further, which if that happens sooner than later, would make it an excellent time to buy into an expensive market. This wouldn’t have registered as a possibility even a few months back.

It’s difficult to predict if this will happen. And if so, whether falling prices become offset by the federal interest rate hikes practically certain to arrive in the coming months.

The only way to know for sure is to wait until the latest rate hike sets in.

Meanwhile, keep in mind that — as with any investment — it’s best time to buy is usually when prices are low.

‘Deals to be had:’ Homebuyers Should Ask For These Incentives While They Have The Upper Hand

The days of waiving contingencies such as appraisals and forgoing inspections are fading into the rearview mirror. Still, contract activity remains slightly competitive depending on your location.

At least 24% of buyers waived the inspection contingency in December 2022, according to the National Association of Realtors confidence survey, up from 16% a month prior and 19% one year ago. An additional 24% of buyers waived an appraisal contingency in December, up slightly from 16% in November and 21% a year ago.

Home inspection contingencies are particularly important because it can let you know if there’s a deal-breaking issue with the property before a purchase occurs. It can also help you negotiate repairs with the seller, which is becoming increasingly common in today’s market.

“If buyers have this short window to buy where they can get incentives to purchase, [they] would rather buy where they have an opportunity to really think about it, get an inspection, a financing contingency and not feel rushed,” Jeff Reynolds, broker at Compass and founder of, told Yahoo Finance.