The real estate housing market is facing troubles all over the world. Home prices skyrocketed, home buyers got out of the market, and developers are fighting with the huge inventory problems. Problems that they can not solve quickly.
Real Estate Housing Market – The Current Situation
Key points on this crisis:
- As mortgage rates raised, homeowners were priced out of the market. There is not enough demand for the increasing number of homes they have built.
- During the pandemic, low mortgage rates from the banks (6%- 7%) led to a surge in the housing market, causing prices to rise and competition to explode. But they are worried about what is going to happen. What will this effect bring for them?
- According to Bloomberg, builders are facing an excess of unsold homes that they can not sell. Their inventory is rising, and their business is going down. There is a fear in the market that the need to overcome.
- Fitch analyst said it has become a competitive market for all builders, where they are trying to release any standing inventory, but they can not. Those developers are giving discounts and other amenities at no cost to attract home buyers, but nothing seems like working.
- The gap between buyers and unsold homes presents a new challenge for the real estate housing market in the whole world, and the gap is on the rise.
- As home and rent prices skyrocketed, the annual income required to qualify for an average home increased by $28,000 since the previous year, about $400,000 in 2022.
- But with an excess of vacant homes, prices are already dropping, and the developers are facing financial troubles because they have to sell them at discounts, with no other option left.
These points can predict that the real estate housing market is facing huge problems, but will it crash?
Is the Housing Market Going to Crash?
Not particularly. But the slowdown has already started to happen all over the world. Here are some data that can help you to make the prediction:
- In May 2022, according to ATTOM Data, 30,880 homes had a foreclosure, scheduled auctions, or bank repossessions.
- The National Association of Realtors (NAR) says home sales fell 8.6 percent from May 2021 to May 2022. The median house price increased exceptionally and reached $407,600 in 2022.
- NAR says the home rate of appreciation was about 14.8 percent from the last year.
- The Census Bureau reported that new houses on which construction has started plunged 9.6 percent to about 1.4 million last month.
Now, you have an idea of what is happing in the real estate market. But I will say it is a bubble, not a crash. It is just for the short term. The market will become profitable in the long run. Just don’t lose your patience.
Analyst Views on this Housing Crisis
Here are some famous experts and their views on this housing market crisis.
- The lead analyst at Housing Wire says we don’t have a bubble. We have unhealthy home price growth, that’s all.
- National Association of Realtors Chief says that no crash is approaching. There is just too much imbalance between supply and demand.
- McBride says real estate prices can move in big spurts and then show relatively little change over a period of years.
According to these experts in the real estate industry, their view is that the market is not going to crash. It is just a short-term fluctuation. In the long run, the market will be stable.
The Three Reasons the Real Estate Housing Market will not Crash!
Here are the three main reasons the expert thinks will help the market get back on track.
1) Builders can not build quickly enough
As builders bring more available homes to the market for selling, more homeowners decide to sell their homes, and prospective buyers get priced out of the market. Demand and supply might back into balance but not overnight. It will take time.
2) Demographic trends will create new buyers
There will always be a strong demand for homes. People who already owned homes realized during the pandemic that they need more space. Because of the rising trend of working from home. That thing is boosting the housing market.
Look, everyone needs a house. The demand will always be there. So, stop worrying about short-term fluctuations. The market will recover.
3) Lending standards will remain strict
Lenders are imposing high standards on borrowers, and those who are getting a mortgage have great credit scores. The Federal Reserve Bank says, if lending standards loosen and we go back to the wild like 2004-2006, then that is a whole different animal.
My Personal View
If the real estate housing market crashes, the world will face a bigger slowdown than the recent pandemics like the 1999 boom. The Governments do not want that. Nowadays, they are more prepared for those kinds of problems. I think they can handle that.
In the meantime, I think we don’t have to worry about the crash because it is not happening right now. It is just a short-term fluctuation. The demand and supply will become stable.
Note, these are all my personal opinion. The risks are yours to take.
So what do you think about this housing market crash? Do you agree with me? Let me know in the comments. I hope this analysis will help you to understand the current situation of the real estate housing market. Thanks for reading.