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There is no denying that the housing market is red hot at the moment. But many people are still wondering if a 2021 or 2022 real estate market crash is on the horizon. Thus, in this article, we’ll go over the main reasons why a housing market crash is unlikely.
Over the last year, much to many people’s surprise, the US housing market has been red hot. As we make our way through the rest of 2021, demand is still at an all-time high, and home sales, as well as prices, are also substantially up.
What’s more, the economy is taking a turn for the better. Yet, there seems to be this overwhelming sense that the market could crash. For many, the aftershock of the 2008 recession and housing market crash is still there. And in light of the recent pandemic, people are asking themselves, can the US housing market maintain its red-hot strike, or will it crash?
Typically, a real estate bubble happens when there is a rapid and unjustified increase in housing prices. This bubble is often spurred on by investor speculation. However, the current rise in prices is based on historically low-interest rates and the current home inventory.
Thus, to put it another way, the straightforward principle of supply and demand is at work here. Moreover, the 2021 housing market has shaped up to be, as predicted, a strong seller’s market. But that is not all—when the current status of the market is coupled with increases in new construction, a gradual rise in supply over the next few months that will fulfill demand and slow the rate of inflation for home values is expected.
Thus, it is fairly safe to say that we are not facing nor will we be facing a real estate bubble in 2021 or even in 2022.
Despite the somewhat mass exodus from attached home communities and high-priced urban areas as people fled to larger square footage homes and the wide-open spaces of suburban and rural markets, the answer is no.
The reason being that, if anything, this mass exodus to the suburbs and beyond made cities more affordable (for now at least). And the rumored end of the condo market has proven to be just that—a rumor. In fact, at the moment, the sudden rise in available inventory and newly discounted rental rates/condo prices has led to a notable return to major urban centers. Furthermore, a significant number of buyers who were previously considering single-family homes in rural and suburban areas responded to tight or low home inventory by taking a second look at condos and pondering new builds.
While many areas of the economy have contracted over the past year, the housing market has stayed remarkably strong. What’s more, the unprecedented demand in the U.S. real estate market that began a year ago has not really stopped. Not only are increasing average home prices up and the number of days that homes stay on the market shrinking, but there is also more residential construction, bidding wars, and a red-hot summer market on its way.
Plus, home prices are not necessarily soaring out of control, nor is there a surplus of inventory like there was prior to the 2008 crash. Likewise, a rebounding economy, fewer jobless claims, equity-rich homeowners, and lower than average mortgage rates continue to make right now the perfect time to buy, sell, and/or tap into your home’s equity.
There is also no denying that foresight has ensured that the 2008 housing market crash does not repeat itself. Not only are mortgage standards nothing like they were before the 2008 crash, but preventive measures by the government have also been taking place. This is evident by Federal programs, relief, and projected policy of the new administration helping to stave off some of the effects of the pandemic.
Overall, according to most indicators, things are looking overwhelmingly positive for the real estate market throughout the rest of 2021 and possibly beyond. Moreover, pent-up demand and consumer-driven policies, along with continued low-interest rates and rising inventory, are all poised to help homeowners hold onto their increased equity–all without throwing the market out of balance.
Additionally, the increase in long-term work-from-home policies promises to give a boost to a wide variety of markets now as well as in the years to come.
Finally, according to Fannie Mae’s chief economists, there is a much anticipated “additional lift” for the latter half of 2021 as buyers return to business as usual and look to put some of their pandemic savings down on a new home. Thus, when you look at all of these factors, trends, and predictions together, another longer-than-usual, white-hot real estate market is definitely in the cards.
Do you have questions about home loans or how you can get approved? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
The new construction housing market appears primed for growth.
The National Association of REALTORS reported Wednesday that pending sales of existing homes fell by 1.30 percent in July. According to the organizationâs Pending Home Sales Index, this was the second straight month that pending home sales dropped. Julyâs Pending Home Sales Index reading was 109.50.