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    Is the Housing Market Going to Crash?

    Concerns are rising about how quickly home values are rising and people fear that the speed of appreciation may lead to a crash in prices later this year. In April 2021, Google reported that the search question, “When is the housing market going to crash?” spiked by 2,450%. Meanwhile, “Why is the market so hot?” searches doubled in just one week and “How much over asking price should I offer on a home 2021”, jumped 350%. 

    If you are a homeowner, you may be wondering if you should take advantage of this incredible seller’s market. If you are a buyer, you may be asking yourself if you should jump in and risk paying too much for a home. Just know, you are not alone when it comes to pondering these questions. 

    “One of the most noteworthy things that came up in Inman’s conversations with agents was that every single one said they’ve had conversations with clients about whether or not the market is heading into a bubble,” Jim Dalrymple II, of Inman News, said.

    If you have questions, Michele Harmon Team has answers! Below, you can find answers to some of our clients’ most pressing questions.

    Q: How is today’s market different from 2008?

    A: The Covid-19 pandemic caused fears of an economic recession. Therefore, homeowners across the United States began to envision a mortgage meltdown. These two fears bring upon memories of the 2008 economic crisis.

    Because of the 2008 economy, our country was better prepared. Banks are properly funded, homeowners hold more equity, and most of the economic activity is focused on factors outside of the Real Estate market. In addition, the Federal Stimulus payments and Paycheck Protection Program allowed those who were highly affected by the shutdowns to remain afloat.

    Q: Are we in a housing bubble?

    A: No. a Real Estate bubble occurs when there is a rapid and unwarranted increase in housing prices, typically triggered by investor theories. Chief Economist for the National Association of Realtors, Lawrence Yun said, “this is not a bubble. It is simply a lack of supply.” In our current situation, the increase in housing prices is not unwarranted. Rising prices are driven by real buyer demand.

    Q: What are the effects of the low interest rates?

    A: Low interest rates allow for home affordability in markets where homes are considered overpriced. According to Freddie Mac, the Federal Home Loan Mortgage Corporation, “rates are projected to continue at their current low levels throughout 2021.” The low interest rates will keep the Real Estate market vibrant and moving for some time.

    Q: What are the effects of low inventory?

    A:  According to the Wall Street Journal, Americans are holding on to their homes longer and this is a big reason why the inventory of homes for sale is at a record low and prices are near record highs. In addition, home sales soared last year, as the pandemic had many Americans searching for a home that would allow them to work remotely with ease. However, the concerns of Covid-19 had the opposite effect for many homeowners looking to sell due to the fear of having strangers in their home during a global pandemic.

    The continuing low inventory is one of the many reasons for rising home prices. As more people become vaccinated, it is expected that the current buyer demand will eventually lead to: 

    • More homeowners choosing to move forward with selling 
    • An increase in new construction homes 

    The Bottom Line

    Overall, most of America’s top Real Estate economists foresee the Real Estate market staying positive throughout 2021. A research note from Goldman Sachs, an investment banking company said, “Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. … consumer surveys indicate that household buying intentions are now the highest in 20 years. … As a result, the model projects double-digit price gains both this year and next.”

    If you still have questions, Michele Harmon Team has answers! While economic indicators and trends are national, Real Estate is local. We are here to answer any questions you may have and we can help you understand what is happening in your specific neighborhood. Call Michele Harmon Team at 713-818-1330 today to learn about your local market and how it affects the value of your home. 

    Sources:

    1. CNBC

    https://www.cnbc.com/2021/04/13/when-is-the-housing-market-going-to-crash-consumers-ask.html

    1. Inman

    https://www.inman.com/2021/05/04/bubble-trouble-how-agents-are-managing-client-anxiety-amid-bubble-talk/

    1. New York Magazine

    https://nymag.com/intelligencer/2020/06/why-this-economic-crisis-wont-be-as-bad-as-2008.html

    1. Axios

    https://www.axios.com/housing-boom-bubble-mortgage-50b573de-94f0-4d7c-a34d-b2b40d9dc664.html

    1. Freddie Mac

    http://www.freddiemac.com/research/forecast/20210114_quarterly_economic_forecast.page?

    1. Wall Street Journal

    https://www.wsj.com/articles/housing-market-stays-tight-as-homeowners-stay-put-11611226802?mod=re_lead_pos1

    1. Goldman Sachs

    https://www.goldmansachs.com/insights/podcasts/episodes/03-12-2021-marty-young.html

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