The housing market decline is not a 'bubble 2.0' due to a key difference from the last crash, says Glenmede

• The current housing market downturn differs significantly from the 2008 crisis, Glenmede says.
• The firm said in a Monday note that the slump today is largely attributed to underinvestment.

The current housing market slump isn't akin to the subprime fueled crash that sparked the Great Financial Crisis in 2008, according to Glenmede.

The firm said in a note on Monday that while the housing downturn will contribute to a broader economic slowdown, the slump itself won't be the main factor behind a potential recession.

The difference between now and the previous housing crisis, the firm noted, is that current conditions are being shaped in large part by underinvestment as opposed to irresponsible lending. The National Association of Realtors has sounded off on this as well, stating last year that decades of underbuilding in the US has helped drive a massive affordability crisis in housing.

The ratio between the median home price and household income is now above its previous peak in '05 that preceded the housing crisis," the note from Glenmede said. "However, the quality of borrowers is vastly different this time around: ~25% of mortgage origination volume went to borrowers with credit scores greater than 760 in '05 vs. ~70% today."

Glenmede added that housing affordability hit an all-time low in October, with home prices staying elevated while 30-year mortgage rates climbed to 7%.

"The state of the residential housing market has become a concern for those suspecting that the U.S. economy may be in the late stage of its current cycle." the note said.