Is the Housing Market About to Crash?

After record-breaking all-time low mortgage rates and soaring home prices at the beginning of this year, the housing market has started to slow down. Interest rates have now doubled since 2021 and many are concerned that we are headed towards a recession. Does that mean the housing market is going to crash?

Not necessarily! A recession does not always equal a housing crisis. Take a look at the last 6 recessions and home prices. There are only 2 out of the 6 instances where home prices declined during the recession. Most people remember the 2008 housing crisis vividly where home prices declined almost 20%. What led to the housing crash in 2008 was a combination of cheap credit, loose lending standards and subprime mortgages. However, today’s homeowners and market conditions are very different from those in 2008. Here are some reasons why we won’t see a market crash:

1. Low housing inventory: While we are seeing signs of the market cooling, experts say that the lack of housing inventory will keep home prices from dropping. According to the September 2022 housing report for Denton County, we only had 2.4 months of inventory available. That is still considered low, as a balanced market is typically considered 6 months of inventory
2. Homeowner equity: Homeowner equity is at the highest level it’s been in the past several decades. According to CoreLogic, U.S. homeowners with mortgages saw a year-over-year equity gain of 27.8% in the 2^nd quarter of 2022. Homeowners have a lot of value in their homes due to rise in home prices the last few years.
3. Strict lending guidelines: The increase in regulations and restrictions on lending coming out of the 2008 crash led us to a stronger, less volatile mortgage market. Most mortgagors are well qualified with low interest rate loans. Combined with a nice equity cushion, there is not a high risk of foreclosure.

What we’re experiencing now is a cooling of the market due to rising interest rates and buyer uncertainty, rather than a “crash”. Prices are not growing at the rate it was, but experts do not expect a steep decline in home prices. If you’re waiting for a crash to buy, you might be waiting for a while! We can help you figure out if buying now or waiting is the right decision for you. Give us a call at 214-449-1022 if you need help with your home purchase or sale!