Despite what experts on the housing bubble claim, home prices aren’t falling. In actuality, recent increases in home prices have firmed up. The crash in home prices this year has been predicted by some experts. They stated that from peak to trough, national home prices will decline by almost 10%. It won’t be long before the majority of those declines occur. And if there is a typical recession, house prices will drop by 20%.
“Buckle in. Assuming rates remain near their current 6.5% and the economy skirts recession, then national house prices will fall almost 10% peak-to-trough. Most of those declines will happen sooner rather than later. And house prices will fall 20% if there is a typical recession.” – Mark Zandi, Chief Economist at Moody’s Analytics
However, we have observed that monthly home price changes have been steady. It is not resembling anything from the years of the housing bubble crash.
On the downside, these projections rattled consumers’ optimism. It made many consumers question the stability of the residential real estate market. The December Consumer Confidence Survey from Fannie Mae provides proof of this. As we started the new year, that made people unsure about their plans to buy or sell a home. But there is no reason to fret. Home prices didn’t plummet. As a matter of fact, it appears to be recovering from the slight decline seen over the previous few months. Other than that, there are more reasons why a crash is not going to occur. Some of the reasons are:
- Inventories are low. According to NAR, there were 2.9 months’ worth of available homes in April. Early in 2022, that quantity was only a meager 1.7 months’ supply. Why many buyers continue to be forced to bid up prices is due to the ongoing lack of inventory. Additionally, it suggests that a price crash in the near term is simply not possible given the current state of supply and demand.
- Standards for lending are still high. Regardless of credit history or down payment amount, lenders offer mortgages to people. Now, lenders set strict requirements for borrowers.
- There is little foreclosure activity. Millions of foreclosed homes flooded the market. This happened in the years following the housing crash, driving prices down. Today, that is not the case. A healthy equity buffer exists in the homes of the majority of homeowners.
The Bottom Line
The affordability of homes continues to be a struggle. But this economic recovery shouldn’t collapse into a bust. Contrary to popular belief, the housing market is much stronger. One thing is clear, then, in spite of the rumors: there hasn’t been a housing crash.
What To Do:
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