Expect the Housing Market To Cool, Not Crash

Expect the Housing Market To Cool, Not Crash

Today’s housing market is white hot. Home prices continue to rise, demand remains high, and mortgage rates remain low. Month after month the market’s activity remains on the uptick. But Google’s reports show the search question “When is the housing market going to crash?” jumped 2,450% in March confirming that homeowners, buyers, and sellers are nervous that this housing boom might actually be a bubble.

The situation is causing some to wonder if we’re gearing up for a market crash reminiscent of 2008’s housing market downturn. There are key differences between today’s market and the housing market of over a decade ago. These differences point to an eventual housing market cool down but not a crash.


3 Indicators That the Housing Market Will Eventually Cool, Not Crash

1. Seller’s Asking Prices are Slowly Decreasing

While listing prices in America’s biggest cities grew by an average of 11.6% compared to last year, the average is down slightly from March’s rate of 12.1%. Daryl Fairweather, Redfin’s chief economist, believes these trends indicate a stable and typical market. “Sellers’ asking prices may be starting to flatten in what so far appears to follow a typical seasonal pattern,” he said.

2. Mortgage Applications are Slowing

Mortgage rates remain low, even dipping from 3.20% to 3.17% in April. Despite that, according to the Mortgage Bankers Association’s Weekly Mortgage Application Survey, from the week ending in April 23, applications decreased 2.5% from a week earlier.

This is a sign that homebuyers will eventually hit an affordability wall and drop out of the market, at least temporarily. The result may be gradual home price reductions to meet the buyers where they are financially.

3. Homeowners Can Afford Their Mortgages

Perhaps the biggest difference between today’s housing market and the housing market of 2008, is strict underwriting procedures lenders currently adhere to. Because lenders are following stricter lending standards a price, dip in the market will not result in a foreclosure crisis.

Investors, who have jumped on the high demand for rental units, are also adding to the stability of the market overall. If prices do begin to fall, their involvement will help to stop the decline.

Home prices are up and home sales are high, but today’s market is following much closer to seasonal norms than the market of 2008, indicating that when the market does shift it will be a cool down, not a crash.

Source: Expect the Housing Market To Cool, Not Crash Home Ownership Matters (June 2021) Tanya Svoboda