Consumer Affairs - Survey: housing market still suffers from 2008 hangover

Survey: housing market still suffers from 2008 hangover
Economic worries now 'the new normal'

The housing market appears healthy. Despite tight inventories, sales keep rising and so do prices. The market appears to have come a long way since the depths of the 2008 financial crisis, when homes prices imploded.

But a new survey suggests the market is still suffering a hangover. The ValueInsured Modern Homebuyer Survey found there is still some nervousness influencing home buying decisions today, a condition it declares as “the new normal.” In particular, it affects Millennials.

When faced with a decision whether to buy or upgrade a home, 63% of consumers and 72% of Millennials say that the 2008 financial crisis has been a source or worry and affected their decision. From now on, the survey authors wrote, this is likely to be a consistent concern.

Here are some of the sources of concern:

  1. Nearly 59% of consumers as a whole, and 68% of Millennials, say global economic events, such as the Brexit, worry them.
  2. About 63% of Americans and 70% of Millennials say the U.S. economy is worrisome.
  3. Nearly half of Americans and 61% of Millennials says concern about national security is causing them to think twice before buying a home.
  4. More than half of Americans and 71% of Millennials say worries about job security, or the difficulty in getting a new one, could make them hesitate.

Roots of concerns

For those who may have forgotten, the housing boom sent home sales surging and prices skyrocketing in the early 2000s. To make it possible for more people to purchase a home, lenders didn't always ask a lot of questions.

Buyers with little or no credit were offered subprime loans that began with low “teaser” rates that adjusted to much higher rates later on. Because the interest rates on subprime loans were much higher than prime loans, subprime mortgages were “securitized” and sold on Wall Street.

When these loans began charging higher rates, many subprime borrowers were forced into foreclosure. That set off a collapse in the market for subprime mortgage securities, a crisis that nearly brought down the financial system.

All of that pulled the rug out from under home prices, and as prices fell, more people ended up in foreclosure. That, the survey concludes, is the cause of “the new normal” in housing.

Bright spots

That said, the survey did find a few bright spots. The housing recovery to date has been real. Beyond that, it found that confidence in the market, while not robust, is trending higher.

The ValueInsured Housing Confidence Index measure was 68.7 points in June, up 1.7 points from March.