Why Rumors of a Housing Crash Don't Fly

If you’re gearing up for a family holiday dinner, prepare for lively discussions—and likely a debate or two. Amid the football games and festive feasts, someone might chime in about an imminent housing crash. While it’s tempting to change the subject, you can counter this claim with some solid facts. Here’s why fears of a housing market collapse don’t hold water.

Homeowners Are in a Strong Financial Position

The New York Fed’s recent credit data report paints a clear picture: today’s homeowners are far better positioned financially than they were during the 2008-2009 housing crisis. Back then, loose lending standards allowed many buyers to purchase homes they couldn’t afford, leading to a wave of foreclosures.

In contrast, the current market is bolstered by the Qualified Mortgage (QM) law, introduced in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law requires lenders to verify a borrower’s ability to repay their loan, significantly reducing risky lending practices. As a result, foreclosures have become rare, and the market is far more stable.

Foreclosures Are at Historically Low Levels

Foreclosures were a defining feature of the 2008 housing crash, with countless homeowners unable to keep up with unsustainable loans. Today, those numbers have plummeted. Even in 2024, foreclosure rates remain low, thanks to stricter lending regulations and a healthier economy.

Record Levels of Home Equity

One of the most compelling reasons a housing crash is unlikely is the record-breaking levels of home equity. On average, homeowners now have $315,000 in equity, a stark contrast to the underwater mortgages of the past.

During the 2009 crisis, over 10% of homeowners owed more on their mortgages than their homes were worth. By 2010, nearly a quarter of all homes were “underwater.” That’s not the case today. High equity levels provide homeowners with financial stability and flexibility, reducing the likelihood of widespread distress in the housing market.

A Balanced Market

Unlike the runaway price increases and speculative buying of the mid-2000s, today’s housing market is more balanced. While prices have risen in recent years, the demand is fueled by solid fundamentals such as low inventory and steady employment. These factors keep the market resilient, even in the face of higher interest rates.

The Bottom Line

The idea of a looming housing crash might make for a dramatic dinner table discussion, but the data tells a different story. Thanks to tighter lending practices, low foreclosure rates, and record-high home equity, the housing market is on solid ground. So the next time someone predicts a crash, you’ll have the facts to set the record straight—before changing the subject to the latest football scores.