Stable Housing Market in 2023: Why Prices Aren't Plunging Like 2008 - Insights by Carey & Giampa Realtors, NH

The biggest reason why housing prices aren’t plunging like they did after 2008? Because the market isn’t being flooded with homes that drive down prices, as happened then.

Capital-rich banks aren’t under pressure as they were then, with foreclosure rates less than a tenth of those from the housing bust. Neither are households, with debt payment burdens near historic lows and few homeowners owing more on their mortgage than the house is worth. Serious delinquency rates, which skyrocketed after 2006 and led to 6 million foreclosures, have fallen by nearly half in the last year, to less than 0.7% of mortgages, according to Fannie Mae. Unemployment is the lowest in 54 years, letting homeowners either trade up or hang on to their current homes easily – and if they are among the 85 percent of owners whose mortgages carry interest rates below 5 percent, many will stay put rather than buy a more expensive house with a costlier loan. 

All that means the supply of homes for sale is likely to stay tight, which limits price declines.

Affordability is bad now, after rate hikes and Covid-driven price increases, but it has been worse. And we’ve all been spoiled by recent history: After the financial crisis, housing affordability nationally literally doubled as interest rates collapsed and prices fell, reaching all-time highs. It had retained most of those gains up until the Covid price surge, even as home values recovered.

“Rates will be dropping in the second quarter, but we don’t see a drastic drop that should make people wait,” said Nadia Evangelou, director of real estate research at the NAR. She predicted that 30-year mortgages will decline to around 5.75 percent. “Buyers realize 3 percent rates are not coming back.”