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Will the U.S. Housing Market Crash in 2023?

when will the housing market crash

Because of high prices and rising interest rates, people are afraid we could see another housing crash like the one we had in 2008.

During the pandemic, housing prices went up a lot. In 2020, home prices will rise by 11.3 percent and 16.9 percent in 2021 because of low-interest rates and a lack of homes in desirable areas, data from Freddie Mac shows.

As the U.S. housing market struggles with a lack of available housing for a long time, “the rise in house prices is not going to be as short-lived as the rise in consumer prices.”

If you sell something, you win. But rising home prices, easy-to-get mortgages, and people who don’t seem to care about prices raise the specter of the 2008 housing market crash.

A lot of people are wondering right now if what goes up must come down.

Is a U.S. Housing Market Crash a sure thing to happen?

People who work for Community Capital Management say that the housing market isn’t likely to crash because of two main things.

Interest rates are at and are likely to stay at, historically low levels, even if they rise by a few percent or two. This means that long-term mortgage financing is a good option for people who want to buy a home. People who want to buy a home for the first time or who want to move up would likely be eager to buy if prices started to fall.

That’s what many of the experts who answered TheStreet’s question about whether the U.S. housing market will crash thought.

It doesn’t mean that prices won’t keep going up, however. Tenpao Lee, a professor emeritus of economics at Niagara University, said this to TheStreet. Lee said that things have changed a lot since the Great Recession of 2008-2009 when the housing market fell more than 40%.

“During The Great Recession of 2008-2009, the demand for housing dropped because of a higher unemployment rate, but the supply/inventory/construction was high with booming expectations at first, then a lot of people defaulted on their loans.”

“Both demand and supply said that prices would go down.” As a result, housing prices fell to an all-time low.

This won’t happen in 2022, he said.

People may not want to buy homes today because they think that the interest rate and inflation will be higher, but the supply of homes has also been cut back by the higher labor and lumber costs caused by the pandemic.

“In other words, the demand side said prices were going down, but the supply side said something else. In addition, the unemployment rate is starting to go down, which could help keep the demand side stable. So, the overall effect on housing prices may be down, but it’s not likely to be a big crash.”

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Why It’s Not 2008’s Housing Market

Banks made it very easy for almost anyone to get a mortgage in 2008, so almost everyone could get one. People with good to good credit could get low-interest loans from the bank without the bank having to check their income or assets.

When that happened, it made it so that even a small economic downturn made many people more likely to default (and that’s what happened).

The government-backed loans from Fannie Mae and Freddie Mac, on the other hand, have also tightened their loan rules, which helps keep bad loans from clogging up the system.

People who don’t qualify for a loan can’t get easy money to buy homes. This gives the housing market some protection from a crash that it didn’t have in 2008.

Even if the economy changes and more people default on their loans (or lenders relax their standards as they did in 2008), the market will stay strong because there isn’t enough money to go around.

Christopher Avallon, a real-estate broker, wrote: “Right now, there is still a lot of demand for homes, but there is still a lot of supply.” “Even if rates go up, if there isn’t more inventory, we’ll see more of the same from 2021.”

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Oliver Moore

Oliver Moore