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Back in 2006, foreclosures flooded the market. That drove down home values dramatically. 1.Many purchasers were not truly qualified for the mortgage they obtained, which led to more homes turning into foreclosures. 2. A number of homeowners cashed in the equity on their homes. When prices dropped, they found themselves in an underwater situation (where the home was worth less than the mortgage on the house). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more. 2008: Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. 2022: Today, the demand for homeownership is real. It’s generated by a re-evaluation of the importance of home due to a worldwide pandemic. Additionally, lending standards are much stricter in the current lending environment. Purchasers can afford the mortgage they’re taking on, so there’s little concern about possible defaults. Bottom Line: The major reason for the housing crash 15 years ago was a tsunami of foreclosures. With much stricter mortgage standards and a historic level of homeowner equity, the fear of massive foreclosures impacting today’s market is not realistic.