This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
Housing economists point to five compelling reasons that no crash is imminent.
1. Inventories are still very low:
The National Association of Realtors says there was a 3.2-month supply of homes for sale in August. In February, that figure was as low as a tiny 2.0-month supply. This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won't allow a price crash in the near future.
2. Builders didn't build quickly enough to meet demand:
Homebuilders pulled way back after the last crash, and they never fully ramped up to pre-2007 levels. Now, there's no way for them to buy land and win regulatory approvals quickly enough to quench demand. While they are building as much as they can, a repeat of the overbuilding of 15 years ago looks unlikely.
"The fundamental reason for the run-up in price is heightened demand and a lack of supply," says Greg McBride, CFA, Bankrate's chief financial analyst. "As builders bring more available homes to market, more homeowners decide to sell and prospective buyers get priced out of the market, supply and demand can come back into balance. It won't happen overnight."
3. Demographic trends are creating new buyers:
There's strong demand for homes on many fronts. Many Americans who already owned homes decided during the pandemic that they needed bigger places, especially with the rise of working from home. Millennials are a huge group and in their prime buying years. And Hispanics are a young, growing demographic keen on homeownership.
4. Lending standards remain strict:
In 2007, "liar loans," in which borrowers didn't need to document their income, were common. Lenders offered mortgages to just about anyone, regardless of credit history or down payment size. Today, lenders impose tough standards on borrowers — and those who are getting a mortgage overwhelmingly have excellent credit.
The typical credit score for mortgage borrowers in the third and fourth quarters of 2021 stood at a record high 786, the Federal Reserve Bank of New York says. "If lending standards loosen and we go back to the wild, wild west days of 2004-2006, then that is a whole different animal," says McBride. "If we start to see prices being bid up by the artificial buying power of loose lending standards, that's when we worry about a crash."
5. Foreclosure activity is muted:
In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices.
That's not the case now.
Most homeowners have a comfortable equity cushion in their homes. Lenders weren't filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020
11 More Housing Market Predictions for 2022, 2023, 2024, 2025, and 2026
Written by Kathy Fettke at RealWealth. Article updated on Sept. 9th, 2022:
Looking for a real estate forecast for the next 5 years? You’re in luck. This is one of the only articles on the web that includes real estate market predictions beyond 2022. And we go even further than that, outlining our predictions through the year 2026!
My top 11 predictions for the housing market for 2022, 2023, 2024, 2025 and 2026:
- Mortgage interest rates will rise through 2022 and 2023.
- Home prices will continue to rise in the markets that are attractive to millennials.
- People won’t want to sell their homes because so many are locked into low interest rates from the past.
- Housing inventory will become even tighter across the country.
- There will be fewer home sales and fewer pending sales.
- iBuyers will be on the rise as they seek to buy rentals.
- Listing agents will be in demand, while buyer’s agents may have to lower fees.
- There will be fewer real estate agents by 2025.
- The real estate agents who remain will offer more services.
- There will be a wider access to data than ever before.
- More people will consider home sharing options.
It is well known by now that millennials will drive the housing market for years to come. They are the most educated generation in history, they are larger than the baby boomer generation, and the largest group of them are ages 29-33.
This group is just now entering the average 1st time home buying age, as they form families. This all comes when housing inventory levels are at extremely unhealthy lows.
An iBuyer is a company that uses technology to make an offer on your home instantly. The top two iBuyer companies are Offerpad and Opendoor.
Offerpad is the most flexible, has the best customer service, and also offers free local moves. Opendoor has the largest purchase volume, generally pays the most, and is available in the most locations.
Image: Bigstock
5 Reasons the Housing Market Is Not About to Crash
This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
Housing economists point to five compelling reasons that no crash is imminent.
1. Inventories are still very low:
The National Association of Realtors says there was a 3.2-month supply of homes for sale in August. In February, that figure was as low as a tiny 2.0-month supply. This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won't allow a price crash in the near future.
2. Builders didn't build quickly enough to meet demand:
Homebuilders pulled way back after the last crash, and they never fully ramped up to pre-2007 levels. Now, there's no way for them to buy land and win regulatory approvals quickly enough to quench demand. While they are building as much as they can, a repeat of the overbuilding of 15 years ago looks unlikely.
"The fundamental reason for the run-up in price is heightened demand and a lack of supply," says Greg McBride, CFA, Bankrate's chief financial analyst. "As builders bring more available homes to market, more homeowners decide to sell and prospective buyers get priced out of the market, supply and demand can come back into balance. It won't happen overnight."
3. Demographic trends are creating new buyers:
There's strong demand for homes on many fronts. Many Americans who already owned homes decided during the pandemic that they needed bigger places, especially with the rise of working from home. Millennials are a huge group and in their prime buying years. And Hispanics are a young, growing demographic keen on homeownership.
4. Lending standards remain strict:
In 2007, "liar loans," in which borrowers didn't need to document their income, were common. Lenders offered mortgages to just about anyone, regardless of credit history or down payment size. Today, lenders impose tough standards on borrowers — and those who are getting a mortgage overwhelmingly have excellent credit.
The typical credit score for mortgage borrowers in the third and fourth quarters of 2021 stood at a record high 786, the Federal Reserve Bank of New York says. "If lending standards loosen and we go back to the wild, wild west days of 2004-2006, then that is a whole different animal," says McBride. "If we start to see prices being bid up by the artificial buying power of loose lending standards, that's when we worry about a crash."
5. Foreclosure activity is muted:
In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices.
That's not the case now.
Most homeowners have a comfortable equity cushion in their homes. Lenders weren't filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020
11 More Housing Market Predictions for 2022, 2023, 2024, 2025, and 2026
Written by Kathy Fettke at RealWealth. Article updated on Sept. 9th, 2022:
Looking for a real estate forecast for the next 5 years? You’re in luck. This is one of the only articles on the web that includes real estate market predictions beyond 2022. And we go even further than that, outlining our predictions through the year 2026!
My top 11 predictions for the housing market for 2022, 2023, 2024, 2025 and 2026:
It is well known by now that millennials will drive the housing market for years to come. They are the most educated generation in history, they are larger than the baby boomer generation, and the largest group of them are ages 29-33.
This group is just now entering the average 1st time home buying age, as they form families. This all comes when housing inventory levels are at extremely unhealthy lows.
An iBuyer is a company that uses technology to make an offer on your home instantly. The top two iBuyer companies are Offerpad and Opendoor.
Offerpad is the most flexible, has the best customer service, and also offers free local moves. Opendoor has the largest purchase volume, generally pays the most, and is available in the most locations.