Jun 252015

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The recent run-up in home prices has led some to speculate that another bubble is forming. And bubbles tend to end spectacularly, like the 2008 housing crash. What are the chances of another crash?

The biggest difference between today’s housing market and the pre-crisis market is the level of leverage. Before the crash, mortgage debt amounted to 63% of real estate value. Today, that leverage rate is down to 44%. Thus, the market today should be more insulated from a rapid decline in prices.

Much of the decline in mortgage debt is the result of the elimination of delinquent debt through foreclosures, short sales, and other mechanisms. It also appears to be the result of the elimination of most of the no-money down payment loan programs that ruled in the pre-crisis era.

Sorry, the comment form is closed at this time.