Is the housing market going to crash? What the experts are saying

In recent times, the housing market has been a hot topic of conversation, with soaring property prices and record-high mortgage rates. Despite these challenges, the housing market continues its upward trajectory, leaving many potential homebuyers frustrated. In this blog post, we’ll delve into the latest data and expert opinions to shed light on the state of the housing market and why a crash isn’t on the horizon.

Rising Prices Defy Expectations

Despite the highest mortgage rates in over two decades, property prices continue to climb. According to the latest S&P CoreLogic Case-Shiller home price index, 19 out of 20 markets measured showed month-over-month gains in July. The National Association of Realtors reports that median home prices in September were nearly 3 percent higher than the previous year, marking the third consecutive month of year-over-year increases.

Supply and Demand Imbalance

One of the key factors driving this surge in prices is the limited housing supply. NAR data for September revealed a mere 3.4-month supply of available homes, well below the 5 to 6 months considered necessary for a balanced market. This scarcity of inventory has created a situation where there are more buyers than sellers, making a significant price decline unlikely.

The Impact of High Mortgage Rates

Mortgage rates have skyrocketed to 8 percent, reaching their highest levels in over two decades. This increase has led to a 12.4 percent rise in the monthly cost of financing the typical home compared to the previous year. Despite this, the demand for homes remains strong, further reinforcing the notion that a crash is not imminent.

Expert Opinions and Forecasts

Housing economists and analysts are in agreement that any potential market correction is likely to be modest. The caution exercised by builders, coupled with strict lending standards and a lack of risky mortgages, sets the current market apart from the conditions leading up to the 2008 housing crash.

Reasons Why a Housing Market Crash Isn’t Expected

1. Low Inventories: The ongoing scarcity of available homes, with a 3.4-month supply in September, rules out a significant price crash in the near future.
2. Cautious Builders: Builders have been measured in their pace of construction, preventing a repeat of the overbuilding seen in the years leading up to the Great Recession.
3. Demographic Trends: Strong demand for homes is fueled by factors such as the need for larger spaces, a growing millennial population, and an increasing interest in homeownership among Hispanics.
4. Strict Lending Standards: Unlike the lax lending practices of the mid-2000s, today’s borrowers face stringent requirements, contributing to the stability of the market.
5. Muted Foreclosure Activity: Unlike the post-crash years, foreclosures are currently at a low, with most homeowners enjoying a comfortable equity cushion in their homes.

Conclusion

While the housing market is undoubtedly experiencing challenges, the evidence suggests that a crash akin to the 2008 recession is unlikely. With a careful balance of supply and demand, coupled with strict lending practices, the housing market is poised to remain resilient. As we navigate this dynamic landscape, it’s important to approach the market with informed optimism.