It doesn’t take a real estate expert to understand that the housing market has enjoyed an unprecedented period of growth. Low inventory and high demand for homes have resulted in record-high asking prices and record-breaking offers. For many, the state of the housing market is eerily reminiscent of the era immediately preceding the Great Recession. Americans are curious (and prospective purchasers may be wishfully thinking): will the housing market crash soon?
Not likely. For one, interest prices are expected to remain low, increasing the affordability of purchasing a home and making homeownership more attainable for prospective purchasers. On the other hand, existing homeowners are refinancing their mortgages, making their current mortgage more affordable. This means more buyers, and fewer sellers. Inventory is expected to remain low, sustaining a high demand for homes and preventing the housing bubble from bursting. COVID struck a chord with homeowners: they value their home and want to remain in it. Homeowners fostered a newfound appreciation for their asset that protected and provided a safe haven during the pandemic.
Furthermore, homeowners are hesitant to sell their homes knowing they will have to compete with purchasers who want what they already have. Yes, a homeowner may be able to sell their home for $50,000-$100,000 above its worth 1-2 years ago, but in turn, that homeowner would have to pay at least $50,000-$100,000 more for a desired home on the market. And that homeowner may still lose an intense bidding war. In today’s market, they are likely to lose multiple bidding wars. So they will stay in their home, preserving low inventory. A combination of low inventory and rising demand will place upward pressure on home prices.
Though housing price growth rates may decelerate in the coming years, it is likely the market will stay strong in the near future.