Why the current housing crisis is so different from the last one?

Despite the fact that high housing prices are driving many buyers away, riskier loans and defaults on mortgages are down.

Once-hot property market cools as mortgage rates rise. Still historically high, home prices are expected to fall.

People wonder if today's housing market is in the same scenario as in 2007-08, when the meltdown sparked the Great Recession.

No, sorry. Today's housing market is better. New lending controls after the collapse helped. These rules strengthen today's borrowers.

The average borrower FICO score for America's 53.5 million first lien mortgages is 751. Two years after the financial crisis, it was 699. Credit quality has improved because lenders are more stringent.

Pandemic-fueled demand has pushed up home prices in the previous two years. Today's homeowners have record equity. According to Black Knight, a mortgage technology and analytics provider, tappable equity, or the amount of cash a borrower may take out of their home while still leaving 20% equity on paper, hit a new high of $11 trillion this year. That's a 34% year-over-year gain.

The homeowner's leverage, or debt relative to the home's worth, has declined considerably.

Total U.S. mortgage debt is less than 43% of property values, a historic low. Negative equity, when a borrower owes more than a home is worth, is rare. In 2011, 1 in 4 borrowers were underwater. 2.5% of homeowners have less than 10% equity. This provides a significant cushion if property prices decrease.

Fewer bad loans

2.5 million ARMs, or 8% of active mortgages, are outstanding. Record low. ARMs are fixed for 5, 7, or 10 years.

In 2007, there were 13.1 million ARMs, or 36% of all mortgages. Back then, loan underwriting was shaky, but the housing meltdown changed the rules.

More than 80% of today's ARM originations have a fixed rate for the first seven to 10 years.

1.4 million ARMs are facing rate resets, which means increased monthly payments. It's risky. In 2007, 10 million ARMs reset higher.

Low mortgage defaults

Just 3% of mortgages are currently delinquent. Even after the first year of the pandemic, there are fewer past-due mortgages than before. There are still 645,000 borrowers in pandemic-related mortgage forbearance programmes.

300,000 delinquent borrowers have exhausted pandemic-related forbearance schemes. Mortgage delinquencies are still historically low, but they've been rising, especially for new loans.

According to the Mortgage Bankers Association, mortgage credit is much tighter than before the pandemic. Since rates began climbing, lenders have lost almost half their revenue, which could make them more aggressive with less-creditworthy customers.

At least 44 large markets have record-low home affordability. Inventory is rising but is still half of pre-pandemic levels.