Is the Housing Market About to Crash Today?

Every few years, a group of market 'experts' will opine about how the housing market is about to crash. The word 'crash' is relative, and even when prices drop 15%, 20%, they usually recover within a few years.

Here are some notes to ponder as we evaluate the above headline:

1. If housing prices 'peaked' a year ago - which is true for some areas but not others - this has little effect on those who bought in the past 2 years when you consider most stay in their home for about 13 years.
2. Unless there is a significant surge in the rate of unemployment, which is currently not in the forecast, the housing market is expected to continue to rebound from some corrections seen in 2023.
3. Real estate markets are ultra-localized, even within cities and towns. Some homes where pricing surged more dramatically than others are more prone to rebalancing than others. Some areas that experienced massive price increases were undervalued and now experience new demand that appears to be consistent.
4. There is a housing shortage and ongoing job creation. Oversupply and a job-cutting recession are the two primary drivers of home price declines.
5. While the inventory of homes for sale has increased over 30% from a year ago, this still represents only about a 3-month housing supply, which is roughly half of where the market was in 2019. In the years leading up to the housing crash of 2007/8/9, inventory stood around 13 months supply, more than 400% higher than what we have today.
6. Today, homeowners have a much higher level of equity in their homes.
7. Americans are not moving as much for work as they used to: they can stay put for longer, and many large corporations have spread their wings beyond New York, Los Angeles, Chicago, Miami and San Francisco.
8. The Mortgage Bankers Association predicts that mortgage rates will drop to about 6.6% by the end of 2024, which will slightly improve the cost of borrowing to buy a house. However, home prices are anticipated to continue to rise, so overall affordability will remain challenging.
9. A rapid rise in insurance rates or real estate taxes can trigger increased inventory. Insurance rates have risen dramatically over the past few years so this should slow in many areas. Right now there are few - if any - indicators of an imminent housing crash.