Will the housing market "crash"?

I think it will level out and may even pull back a little. I don’t foresee any type of crash coming though. Inventory remains too low.

We are headed towards a recession. Inflation is staggering. JP Morgan is predicting $6/gallon gasoline this Summer. The Fed will continue to raise rates in response to inflation. Lot's of people will not qualify for a mortgage on the house they want. The stock market is taking massive hits and people are seeing their retirement accounts dwindle.


House prices will be forced down.

Yes.

This chart really summarizes why it is unlikely:

Where did that chart come from? It doesn't match US Census data

LINK

IMO it will not crash.

Up until now we have little supply and extreme demand. That has led to crazy prices(30% increase in value year over year). Now we still have little supply with decreased demand, but still demand which will result in year over year value increases that aren't outrageous.

IMO prices of homes won't stay even or drop unless demand craters (8-10% interest rates) or supply increase.

But supply won't increase from people selling their homes because
A) Rent is also stupid high right now
B) Everyone has a historicly low interest rate

So the only way supply will increase is if more homes are built. But with high material cost and supply chain issues, combined with slowing demand, nobody wants to start ramping up home production. Which will in turn keep demand from falling too far. Thus keeping home prices from crashing.

And as another poster pointed out, the majority of individuals who bought their home can actually afford them due to the changes in mortgage qualification. So in order to cause mass foreclosures we would have to push past a recession and fall into a full blown depression.

There are a couple things that might change values quickly.

One, if the stock market craters a lot of the boomers who own second or third houses may sell to maintain their approximate standards of living. A lot of boomers seem to have actually bought properties since the 2020 stimulus money (when you would normally expect people in their age group to be downsizing)

Two, if there's any investor panic the effect of a group of properties being sold all at once will put abnormal downward pressure on home prices. Zillow found a willing buyer for a large chunk of properties recently. A fair chunk of the investors who bought into funds which have been buying properties are not big fish - and retail investors are kinda predictable when it comes to panic selling when their investments start to take on water.

As a percentage of total income property costs are historically elevated. I don't know how or when that corrects but I think driving those prices down is a significant goal of the Powell fed hikes.

quote:

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That chart summarizes why people should check their sources.

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I guess I just assumed the chief economist at the Navy Federal Credit Union would have accurate data.

That said, the 2010 data are relatively close, and there were about as many homes built in the 4 years leading up to the crash as there were than the decade that followed.

So we’re still critically short in housing.

Nope there is a serious lack of supply across the United States and with interest rates continuing to rise the supply will only continue to tighten even more because people aren't going to be moving out of their houses because if they sell the house they move into won't be as nice due to the higher interest rates.

You also have to account for the 500k people a month moving into the US which is moving a lot of properties into the rental market.

If there is a soft spot it will be in the 2nd home and AirBNB/VRBO space as people will not be traveling as much the higher these gas prices go up.