Is the Housing Market About To Crash?

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Real Estate

Realtor.com has an article titled “Home Prices Have Hit a New High—Is the Housing Market About To Crash?”,
By Clare Trapasso on
May 3, 2021
 
considering home prices are going higher some people are expecting the housing prices is a market bubble that will burst just like 2008. It appears from this article that expert do not feel that will be the case. The article points out that “the housing is likely to keep defying common sense.”
 
Here are some of the key exerts directly from the article:
 
“experts say there’s no reason to prepare for a crash landing like we experienced in 2008 and 2009. This time around, the reason for the out-of-control prices is simply that there are many more buyers than there are properties for sale. Another simple rule: Prices rise when there is more demand than supply. Crazy, it seems, is the new normal.
 
“I find it difficult to say we’re not in a housing bubble, but I [also] find it difficult to say home prices are going to crash,” says Ali Wolf, chief economist at building consultancy Zonda. “Today’s prices feel unsustainable, today’s frenzy feels unsustainable. But that doesn’t mean there’s going to be a crash. That’s bad news for a lot of shoppers who are hoping for prices to come down.”
 
Why isn’t the housing market on the verge of crashing?
 
The fast-rising prices and market mania may feel reminiscent of the days leading up to the last housing crash. But the culprits behind the last meltdown aren’t as present this time around. For starters, today there are far more buyers than homes for sale. That’s a sharp reversal from the late 2000s, when overbuilding yielded far more properties than there were buyers. Now, there isn’t enough new construction to meet demand and investors aren’t going wild driving up prices.
 
Most importantly, bad mortgages—the key factor in the financial crisis—have largely disappeared from the market. New regulation in the wake of the last calamity has ensured that only the most qualified borrowers can get mortgages and the riskiest loans, such as subprime mortgages, are largely no longer available to the masses.
 
”Today’s buyers may be paying top dollar, but they’ve been vetted to ensure they can afford their mortgages.
 
Could some folks overpay for homes that will lose value?
 
Buying a house is often the biggest investment that most folks will ever make—so they want to make sure it will increase in value. But many folks are wondering if the value of homes purchased today at record-high prices will fall once the COVID-19 pandemic is over and the market returns to some semblance of sanity.
 
Will they be able to sell them for at least as much as they paid? Or will they wind up owing more on their loans than their homes are worth?
 
The experts say most buyers shouldn’t worry. The lack of supply combined with the high demand should keep home prices stable—for the most part.
 
“It’s certainly possible that home prices can decline. But I don’t think it’s likely we’ll see big declines,” says Realtor.com’s Hale. “It’s more likely prices will flatten where they are.”
 
Will the housing market ever settle down?
 
Mortgage interest rates are the wild card. When they hit record lows, falling below 3% on a 30-year fixed-rate mortgage for the first time, prices had room to shoot up without increasing a buyer’s monthly mortgage payment.
 
If rates go up into the 4% or 5% range, many buyers wouldn’t be able to afford the monthly mortgage payments on the homes they want anymore. So they could leave the market, reducing demand.
 
As mortgage rates rise, “that’s going to suck the wind out of this very, very frothy market,” says Zandi.
 
The reverse is true as well, of course. If they were to dip, that would allow prices to continue ticking up. However, economists don’t believe rates have much room to go lower.”