Real Estate Market vs 2008 Crisis : the key points

Current Market

Surely even the most ignorant citizen must have heard and seen the frenzy for the property that has captured the country. Experts in economy and property have stirred up discussions, likening the characteristics of the current property market to that which preceded the crash in 2008. 

For those who felt the burden of the 2008 crash economically and psychologically, it is an event they would not want a repeat. But is this the truth of the matter? In this article, we analyze the two markets.

The 2008 Housing Crisis: the bubble

2008 Housing Crisis

So, what exactly happened or preceded the recession of 2008? The early 2000s saw a boom in the housing market. There was increased demand for housing and an appreciation in prices. Investors, both local and international, boosted the boom by sinking millions of dollars into the property industry to meet the increased demand. 

With possible profits in the future, mortgage and lending companies approved subprime loans without proper due diligence on the borrowers. This was detrimental in the long term as more and more borrowers defaulted on their loans. 

As the rate of defaults increased, a ripple-effect spread throughout the country. Banks were caught in a very tricky scenario with money sunk in property and none in the reserves.

Loan Qualification Standards in 2008

The consideration for getting approved for a loan has changed dramatically since the early 2000s. Mortgage companies are now more comprehensive and firm in the approval of any borrower. Before getting approved for a loan, you can expect a lender to look deep into your income levels, employment, and credit score.

The balance between supply and demand

In 2008, there was an increased demand for housing but also an exorbitant supply throughout the country. These new homes were mostly vacant due to an appreciation in price that put them in a higher price bracket than most could afford. 

Our current market is different with an increased demand for housing and a very low supply. The supply of housing is quite passive to the need for affordable housing, especially for young families. In addition, households are looking to purchase affordable houses within their purchasing power.

How to value of the real estate market ?

real estate market

Research into the years before the 2008 crisis reveals that appreciation of property was at extravagant levels. You could say it was out of control. The rise in price did not match up to the increase in income levels or purchasing power. 

The property became too expensive to purchase for most homeowners compared to income. These led to defaults and the subsequent crash of the market.  

While 2008 is also experiencing an appreciation in house prices, the rise is gentler and controlled. The stable rise in price can be attributed to certain ‘concrete’ factors.

Should I purchase a home now ?

The answer is a big yes. The pandemic shook the market and brought about several changes; including low-interest rates, soon to climb up. Households are encouraged to take advantage of the current market conditions to secure a home for their family.

Buying in a hot market has its risks- those risks could be mitigated if you plan out thoroughly what is going on before making any decisions such as purchasing. Over time, it may have been good investment for most markets within the U.S., however it is not always an easy ride


Looking for expert help as you purchase your new home? Your search has come to an end. The team from Sapphire Capital Investment has the experience, expertise, and industry knowledge to help you make the best decisions.  

Get in touch with us for sound and professional advice. 

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