The writing has been on the wall for the past few months that the housing market is struggling. Today, most experts agree that it is not a matter of whether there will be a housing crash but when that crash will occur and how badly it will be for the real estate industry. There is also an agreement that by 2023, the housing market prices will be negative compared year-over-year.
According to data, new single-family homes in the US fell by 12.6 per cent in July. To put this into raw numbers, the fall is equivalent to an annualized pace of 511,000 new homes that would normally sell in a robust real estate market, compared to an expectation of 575,000 homes. The miss in July was also the sixth time this year that the housing market data showed that new homes were not selling at the same pace as they did in previous years.
New single-family homes are falling, construction of these homes has also slowed, applications for mortgages have also been plummeting, and the housing market inventory has skyrocketed. As a result, the housing supply is also at an all-time high to levels that have not been seen since the 2008/2009 housing market crash.
When will the Housing Crash Happen?
Real estate has, for years, operated on the assumption that there is always more demand than supply. However, that is not the only reason the prices keep increasing. For instance, throughout this year, despite the demand remaining relatively stable, real estate prices saw a price surge due to inflation in the first few months of the year.
However, despite the current real estate market conditions, I do not expect a housing crash any time soon. There is even a high likelihood that the crash will not happen at all, and the current rising mortgage prices, which rising interest rates have driven up, will have stabilized by the first quarter of next year.
Despite many people fearing a repeat of 2008/2009, conditions that accelerated the previous housing crash are no longer available. Today, the lending standards are much stricter, so it is unlikely that we may see another market crash soon.
“Over here in the UK – it’s often said that when the US sneezes, we catch a cold. Although the banks are well-capitalized to (hopefully) weather the storm, interest rate rises will continue to place pressure on the aggressive house price growth witnessed in recent years,” comments Ruban Selvanayagam of portfolio sales group Property Solvers.