How the housing market has changed since the bubble burst

Housing market strengthens as mortgage debt decreases.

Several forces collided in the early 2000s that lead to the housing boom and eventual crash.

A recent Business Insider article isolates two of those trends: an influx of new homebuyers in the market who were able to get mortgages, and the fact that many of them put down very little money up front. This combination led to a massively leveraged hosing market. 

According to the source, the most important difference about today's market is the lower leverage against lenders, reducing the risk of another major downturn. 

Speaking to Business Insider, Bank of America Merrill Lynch economist Michelle Meyer explained that the debt-to-home value ratio shows the market's strength.

"[The ratio] shows that 44 percent of real estate wealth is made up of mortgage debt. This is nearly back to the pre-bubble crisis and compares to a peak of 63 percent in the second quarter of 2009. A lower aggregate loan-to-value ratio suggests the real estate market should be more susceptible to shocks in the future," she said.

Meyer said that both foreclosures of the bubble-era homes and bigger down payments leading to lower loan sizes have given way to the decline of mortgage debt.

Low interest rates and increased housing affordability have assisted in keeping mortgage debt down. Recently, Freddie Mac announced that rates for 30 year fixed rate mortgages were 4.04 percent and the 15 year fixed rate mortgage was at 3.25 percent. Last month, the National Association of Home Builders reported 66.5 percent of homes sold in the first three months of 2015 were affordable to Americans earning the median income of $65,800.

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