Housing Market Crash Not Likely To Happen Soon, Say Experts

To date, more than 300 groups of homeowners are believed to be refusing to pay between US$150 billion (£127 billion) and US$370 billion in homeloans, according to informal surveys published online. David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. Better yet, you might even choose to buy real estate stocks if other traders are selling them. —Lenders repossessed 2,857 U.S. properties through completed foreclosures — known as “real estate owned,” or REO — in May 2022.

  • The real problem comes further down the line, when developers hold on to sites they have permission to build on without actually doing any of the building for years.
  • The implications for home buyers and sellers, as well as stock investors, cannot be ignored.
  • If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows.
  • If the market declines, that would be another economic headwind among many for the US as it climbs out of the pandemic.
  • There are many reasons for this, including legislative changes regarding lending practices.

Consequently, home price trends can depend heavily on whether supply keeps up with demand. After a flat June, inventory of unsold, existing homes increased by 3.7% between June and July. Yet, this only bumps existing inventory from a paltry 3.1-month supply to a 3.3-month supply at the current sales pace.

‘The supply just isn’t there’

It’s possible that falling home values could erase enough equity to drop you below the 15% or 20% threshold, making you ineligible for a home equity loan or HELOC. Even if you get a HELOC before that happens, the lender could reduce your credit limit later to bring it back in line with your home’s value. Kushi calls home prices “downward sticky,” meaning that sellers are reluctant to accept reductions unless they’re desperate to sell.

  • Her writing has been produced internationally and she worked as an operations specialist in the Broadway touring industry.
  • Better yet, you might even choose to buy real estate stocks if other traders are selling them.
  • The fact that it was unsustainable is one of the very reasons it is slowing down.
  • Applications for building permits rose 0.6% from the previous month, according to the Census Bureau and HUD.
  • It’s a similar story in many areas of the country that historically have been more affordable.

However, the federal government has extended both the forbearance program and foreclosure moratorium on multiple occasions. As of mid-April, roughly 2.3 million homeowners were still skipping mortgage payments, according to an estimate from the Mortgage Bankers Association. The big problem for home buyers right now is that there are not many properties to go around. As with the surge in demand, the rise in home prices isn’t artificial, unless you consider the coronavirus pandemic a temporary and/or artificial force fueling house prices.

Fuller picture emerges of 13 federal executions at end of Trump’s presidency

It’s followed by New Jersey, where one in every 2,346 homes are in some stage of foreclosure. Duncan agrees that the sharp rise in home values, while unusual, smart money concept isn’t a sign of a bubble. Meanwhile, Greg McBride, CFA, Bankrate chief financial analyst, says a price plateau is more likely than a sharp fall.

Home Prices Might Drop but Won’t Crash: What Buyers Should Know

“After robust gains over the past five years, the nationwide nominal house price index is now 40% above its 2012 low-point and 4% above the peak reached in 2006. If 2006 was a historic bubble, then current price levels should be looked at more closely,” according to J.P. Real estate bubbles are generally caused by too much money chasing too few properties. Bubbles can also be caused by prolonged economic prosperity, a period of low interest rates, easy access to credit, buyer euphoria, and increased speculation. Solid demand, a lack of existing inventory and improving supply chain efficiency helped shift builder confidence into positive territory for the first time in 11 months. If there were significant job losses, we could see an increase in the number of people unable to make their mortgage payments and who would therefore have to list their homes for sale, says Sturtevant.

How We Make Money

The National Association of Realtors (NAR) recently reported that first-time home buyers made up only 28% of purchases in March 2023, down from 30% a year ago. A recession would likely spook prospective first-time buyers even more and transaction activity would sink further. Unlike a fixed-rate mortgage, an adjustable-rate mortgage’s (ARM) interest rate changes periodically after an initial fixed-rate period. Kiefer says that homeowners who took out ARMs  leading up to the 2008 crisis got hit with payment shock once the interest rates reset and many couldn’t make the higher monthly payments. Among the differences between today’s housing market and the 2008 housing crash is that lending standards are much tighter now due to lessons learned and new regulations enacted after the last crisis.

Illinois had the most REOs at 350, followed by Michigan’s 249, according to ATTOM. Divounguy adds that homes that are priced right are the ones that get the competition while others linger on the market. Even as prices soften, time lost trader you may realize that the area where you want to buy a home is still out of reach, so it’s important to be flexible. Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.

When that bubble burst, it triggered a foreclosure crisis among homeowners, as well as a credit crisis among the investors who owned bonds backed by these underwater mortgages. Even after accounting for recent price drops, home prices have increased 38% since March of 2020. In fact, borrowers saw their equity increase by 7.3% in Q compared to the year before, according to a recent CoreLogic report.

While less people who want to buy can due to high prices, the supply shortage will hopefully keep supply from greatly outpacing demand. Prior to this, Robin was a contractor with SoFi, where she wrote mortgage content. Her writing has been produced internationally and she worked as an operations specialist in the Broadway touring how to buy celsius industry. So what does that mean for the housing market once the predicted recession is in the rearview mirror? Economists at the National Bureau of Economic Research (NBER) describe a recession as a prolonged period lasting at least a few months during which there is a significant and widespread decline in economic activity.

Our content is intended to be used for general information purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances and consult with your own investment, financial, tax and legal advisers. Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here. “However, right now, even if we do head into a recession later this year, the labor market is still extremely tight and major job losses still seem unlikely,” Sturtevant says.

To put it into perspective, even a 20% drop in housing prices through 2023 would not put home prices back at their pre-pandemic level. The chart below (figure 1) shows the change in China’s Real Estate Climate index, which measures aggregate business activity in land sales and real estate. New house sales have slumped substantially this year, with values dropping by 22% compared to the same time last year.

The weak market has substantially reduced the funding available to developers, as figure 2 below shows. This is the root cause of the current situation in which developers have paused building, causing homeowners to strike by refusing to pay their mortgages. Under the presale system, buyers deposit money in an account before the property is built. Chinese banks and local authorities are obligated to monitor developers’ use of these funds. Developers are not supposed to have access to all of the money until they have hit certain pre-agreed milestones during the building process.