Here’s why you shouldn’t be afraid of a market crash.
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Here are the four reasons why you shouldn’t fear a market crash:
1. The economy is getting better. During the market crash of 2008, we found most homes were overleveraged, there was uncertainty in the market, and discounts were causing some neighborhoods to lower too far in price. There were 541,000 foreclosures. Now, we only have 216,000 foreclosures nationally—this may sound like a lot, but foreclosures are unavoidable, and we’ve more than halved the number.
2. Most homeowners now have equity. During the crash, people were taking out enormous amounts of equity for refinancing. In 2000, we only had $26 billion worth of refinances, but the crash saw over $321 billion worth. As of the third quarter of 2018, we only have about $38 billion. People are being more wary of refinancing and banks are having stricter policies.
These factors have greatly lowered the chances of experiencing a market crash.
3. Lending standards have changed. Since the crash, banks and the government have put tighter restrictions on how lending is to be done. NINJA loans (no income, no job or assets) have been pretty much eliminated.
4. Affordability has improved. Between 1985 and 2000, the monthly mortgage payment percentage was at 21%. In 2006, it hit 25.4%. Now, it’s at 17.5%.
These factors have greatly lowered the chances of experiencing a market crash anytime in the near future. If you have any questions or need more information, feel free to reach out to me. I look forward to hearing from you soon.
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