5 Reasons a Housing Market Crash Is Not a Given

If homebuyers compare the current housing market to what happened in 2006, they may detect similarities when home prices grew increasingly expensive before the bubble burst.

Is the Bubble About to Burst?

As per a recent Redfin survey, 77% of homeowners think there is a bubble in their home area. Is this a sign the housing market will crash? Not necessarily. Fifteen years ago, permissive lending standards and rampant investor speculation fueled high housing prices. Today, the market is very different.

Indications of a Housing Market Crash?

he answer is that while the housing price appreciation we’re witnessing is reminiscent of a bubble, you’re unlikely to conclude the same if you dig into the fundamentals. As it turns out, the underlying conditions of today’s housing market are on a much more solid foundation than they were 15 years ago. But it’s not all smooth sailing.

Is There a Problem?

According to Bankrate’s chief financial analyst, Greg McBride, CFA, a price stabilization is more likely than a steep decline. “While the current speed of home price growth is not sustainable in the long term, prices are not at risk of a severe decline,” he said.

Cool Rather Than Crash

The consensus from analysts is that while there may be some signs of a bubble, rather than crashing, the housing market will likely cool over the coming months.  The National Association of Realtors predicts a 3% increase in property prices in the coming year. The Association’s Chief Economist, Lawrence Yun, thinks the housing industry will continue to perform well in 2023 and beyond, but he does not anticipate outperforming recent performance

Reasons There Won’t be a Housing Market Crash

Stockpiles Have Dropped to Historic Lows

Homebuyers had just 2.4 months of supply in September, according to the National Association of Realtors (NAR). The stockpile was down to just 2.0 months’ worth of supplies in February. Like any commodity, such as oil, house buyers bid up prices because of a lack of available products.

Builders Are Unable to Meet Demand Quickly Enough

Home building slowed down significantly after the last recession and has never fully recovered to pre-2007 levels. Builders can no longer buy land and rapidly secure regulatory permissions to satisfy demand. According to McBride, price increases are primarily due to increased demand and a supply shortage.

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