Why Today’s Housing Market Is Not About To Crash in L.A. and Beverly Hills, CA
Why Today’s Housing Market Is Not About To Crash in L.A. and Beverly Hills, CA | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert
In recent times, there has been growing concern about a possible housing market crash. With affordability challenges and recession talks, it's easy to understand why some people may worry. However, the data clearly indicates that the current market is quite different from the one that led to the 2008 housing crisis. Here's why:
- It's Harder To Get A Loan Now
The process of getting a home loan is more difficult than it was during the lead-up to the 2008 housing crisis. Lending institutions now have higher standards for mortgage approvals, and as such, fewer people qualify for home loans or refinancing. This makes the system much more stable than it was before, as banks are not taking on as much risk as they did in the past. In areas like Los Angeles and Beverly Hills, CA, where the housing market is highly competitive, these higher lending standards help ensure that borrowers can afford their mortgage payments.
- Unemployment Recovered Faster This Time
While the pandemic caused a spike in unemployment over the last couple of years, the rate has recovered to pre-pandemic levels much faster than during the Great Recession. This quick recovery means that homeowners are less likely to face financial hardship and default on their loans, which reduces the risk of foreclosures and strengthens the housing market. In cities like Los Angeles and Beverly Hills, CA, where the job market is diverse and robust, the employment rates are even more encouraging.
- There Are Far Fewer Homes For Sale Today
During the housing crisis of 2008, there were too many homes for sale, which led to a dramatic fall in prices. Today, there's a shortage of inventory available overall, primarily due to years of underbuilding homes. The lack of available homes on the market has kept prices stable or even increased them, depending on the location. In highly desirable cities like Los Angeles and Beverly Hills, CA, where inventory is often scarce, this trend has led to a highly competitive market.
- Equity Levels Are Near Record Highs
Homeowners today have near-record amounts of equity due to a shortage of homes on the market and increasing demand. This equity helps protect them from foreclosure should they fall behind on their mortgage payments, making them well-positioned to weather a shallow recession. This is a significant difference from the Great Recession, where many homeowners found themselves underwater on their mortgages, owing more than their homes were worth.
In summary, today's housing market is far more stable than it was in 2008. Higher lending standards, a faster jobs recovery, a shortage of homes for sale, and near-record equity levels all help to reduce the risk of a housing market crash. In cities like Los Angeles and Beverly Hills, CA, where the real estate market is always in high demand, these factors make homeownership a sound investment.