Is The Housing Market Going To Crash? What To Expect

Real estate industry experts have been debating for years whether or not the housing market is going to experience a crash similar to the one that occurred in 2008. While there are many factors that could contribute to a crash, including an economic recession, it's difficult to say definitively whether or not one will occur.

A crash can be declared only in retrospect, so it's hard to say with certainty whether or not the housing market is currently in a bubble. However, there are some indications that a bubble may be forming.

If you're considering buying a home, it's important to be aware of the potential risks involved. On the other hand, if you already own a home, you may be wondering if now is the time to sell or not.

Are We On The Verge of a Housing Bubble?

In a blog post at the end of March, the Federal Reserve Bank of Dallas observed "signs of a developing U.S. housing bubble." While the sharp rise in house prices on its own does not imply a bubble, other fundamental elements must be taken into account, including "shifts in disposable income, credit and access to its costs, supply interruptions, and rising labor and raw construction materials costs are among the economic reasons for continued real house price growth," according to the report.

In other words, a variety of factors must come together to create a housing bubble. The most important factor is usually an increase in demand for homes that outpaces the available supply. This can happen when buyers are willing to pay more for a home than it is actually worth.

Another key ingredient is easy access to credit, which allows buyers to take on more debt than they may be able to afford. This was a major issue in the lead-up to the last housing crash, as lenders handed out subprime mortgages to borrowers with poor credit.

When these borrowers were unable to make their payments, it led to a wave of foreclosures that contributed to the collapse of the housing market.

So, to say certainly if we are on the verge of a housing bubble, we must look at both the demand for homes as well as the availability of credit.

The root of the issue, as stated in the Dallas Fed report, is when buyers have faith that current high housing prices will continue rising. When many individuals share this belief, it can create a snowball effect where everyone rushes to buy houses out of fear of being priced out later. This drives up prices even more and creates an unrealistic standard for future house price growth.

Despite the fact that the paper described the present housing market as "abnormal," the authors claimed that "there is no anticipation that fallout from a housing correction would be comparable to the 2007–09" financial crisis in terms of its scale.

The 3 Reasons the Housing Market is Expected to Remain Hot

It is safe to conclude that the interest in purchasing a home is still very high. The combination of historically low mortgage rates, a strong job market, and the rise in millennial buyers has resulted in increased demand for both new and existing homes.

In fact, according to Realtor.com's Housing Market Recovery Index, the U.S. housing market has now fully recovered from the crash that occurred more than 14 years ago.

Here are 3 reasons the housing market is expected to remain hot:

1. Decrease in foreclosures.

The number of foreclosures has been on the decline since the housing market crash in 2007-2008. This is good news for the market because it means that there are fewer distressed properties available for sale.

As the number of foreclosures decreases, it will help support house prices. This is yet another reason why the housing market is expected to remain strong in the coming years.

2. There is more demand than there is available supply.

The number of homes available for sale is not keeping up with the demand from buyers. This imbalance is causing prices to rise. It is likely that this trend will continue in the near future.

The over-demand means that many buyers are resorting to bidding wars in order to secure a home. In some cases, this can result in the buyer paying more for the home than it is actually worth. As long as the demand is high, the housing market will remain hot.

3. The demand for housing among millennials is on the rise, with Gen Zers not far behind.

As more and more millennials enter the workforce and start families, they are going to need places to live. And, as they get older, they will likely have more money to spend on housing. This increased demand will help support house prices.

Next are Gen Zers, who are already starting to enter the housing market. In a recent survey, it was found that "64 percent of respondents aged 18-24 indicated they would like to purchase a home within the next five years."

What to Expect

It is still too soon to say for certain whether or not the housing market is in a bubble. Accordingly, it is important to monitor both the demand for homes as well as the availability of credit.

If you are thinking about buying a home, it is important to be aware of the risks involved. Make sure to do your research and consult with a financial advisor to make sure that you are making the right decision for your unique situation.

For real estate professionals, it is important to stay up-to-date on the latest market trends. This will help you better advise your clients and make sure that you are helping them make the best decision for their needs.

In general, it is always a good idea to be prepared for a potential market crash. If you are thinking about buying a home, make sure that you are financially stable and have a plan in place in case the market does drop.

It is also important to remember that a market crash is not necessarily a bad thing. While it can cause prices to drop, it can also create opportunities for buyers who are looking to get a good deal on a property.

The bottom line is that the housing market is unpredictable. It is important to be aware of the risks involved in any type of real estate transaction.

If you are in some way looking for an assistant that will help you monitor market trends, a Virtual Assistant from Virtudesk can be of great help. Fill out this form, and one of our Consultants will be in touch.

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