Given the mercurial and unpredictable market, it’s almost become fashionable for people to predict a housing crash. Those taking a contrarian view have been all but ridiculed – particularly among those not understanding the intricacies of the market. Rebecca Richardson, of UMortgage, is among those who predicted early that a housing crash would not emerge – making the positive prognostication one year ago. “Certainly got some strong opinions on why I was wrong,” she says now with a measure of sarcasm targeting her naysayers. A year after going out on a limb dismissing gloomy housing crash prognostications, she points to growing evidence suggesting the scenario isn’t likely to emerge – despite challenging market forces.
US housing crash – how likely is it....
“Recession, inflation, stagflation -- all of it matters, all of it can have a big impact on American households,” she said. “But that doesn’t mean the housing market’s going to crash.”
Take the National Home Price Index, for example. She pointed to the National Home Price Index as evidence of why a housing market crash is unlikely. Compiled and published monthly, the index measures the change in the value of the US residential housing market by tracking the purchase prices of single-family homes. The index tracks housing prices historically, making allowances for past recessionary periods. “During those recessions – except really around 2008 – for the most part home values continued to increase,” she noted. The housing market bubble burst in 2008 when subprime mortgages, a massive consumer debt load and crashing home values converged, as recorded in Investopedia. An untold number of homeowners found their homes figuratively underwater – homeowners owing more than their houses were worth – as they defaulted on their mortgages. “I’m not saying that we won’t see some sort of correction or that some cities, some areas, won’t see declines because some of them have run incredibly too hot,” she said. “However, that does not mean that we’re necessarily headed for a housing crash.” For the most part, economists share Richardson’s view. Housing economists point to five main reasons why the market isn’t likely to crash anytime soon: a drop in foreclosures; lack of newly constructed housing supply; low inventory; plenty of new buyers; and stricter lending standards.
Bottom line: Don’t invest based on fear. Richardson agrees: “If buying a home made sense to you a year or two years ago, it probably still makes sense,” she says. “But you need to make sure you’re working with a lender and a realtor who can advise you on your options, on the market, so you can make a smart, informed decision instead of one out of fear.”
By Tony Cantu
30 May 2023 READ THE FULL ARTICLE HERE