Today a lot of people are very worried about what is going on in the housing market and what it is going to look like over the year. Americans are searching why home prices are rising these days. Housing market that has increased in price 17% year-over-year. Housing is now at the highest price it has ever been in history. 2/3 of homes receive multiple offers. Unfortunately, the housing market reached the lowest level in history.
What Is Happening?
Interest rates were lowered to help the country’s economy and that caused mortgage interest rates to drop. However, interest rates were just one component that will determine how much at home sells for the other component is inventory. Nobody wants to sell their houses during the Covid19 pandemic. People put their homes off the market with the expectation that they are going to be inside for long.
When all these buyers saw that mortgage rates dropped 30%, lack of inventory did not change. At least in the short term the price of housing could remain unusually high and the increase in the cost of building usually winds up being passed onto you as a customer in the form of higher listing prices. It puts the risk on the builder. They will stop building houses which worsen the housing shortage. Some analysts say that it will last about 1-1.5 year. After that things will return to normal.
Last year a lot of things happened. It was reported that real estate prices have hit another all-time record high across nearly the entire country. Housing inventory has hit an all-time record low. Therefore, buyers are left paying significantly over asking just for a chance to get the home. There is going to be another real estate– housing market crash. We do not know exactly when and what will cause that but there are some lessons that we could use from previous housing market crashes which happened in the past that anyone could use today.
When Did Real Estate Crash Happen?
In 1929 Stock market peaked from record high speculation and borrowed money so the real estate market fell alongside everything else. Real estate values fell by 67% and it took 3-4 decades for real estate values to recover back to their normal. Then in 1990 it happened again. The savings and loan crisis caused interest rates to go up and constructions ended up going down so prices remained fairly flat until about 1997. When it comes to the 2008 crash, I think everyone knows about it well. Housing prices dropped anywhere from 30 % to 62% depending on the area.
This is 2021 and we are back another record again. We have some obstacles to overcome. According to investigation 2.6 million homeowners are in mortgage forbearance. It means they have paused their mortgage payments. If they are unable to make their payments, they risk going into foreclosure. If that happens everything will come to the market at the exact same time. However, we do not know that now. Homeowners can postpone listing their homes in the market while they are not able to make their payments. It can drive up prices even more. Mortgage forbearance rate has been decreasing month by month. We have to give people more time to recover their economy financially.
You must prepare for another housing market crash because at some point in the future the housing market is going to be down. It is important that you are prepared for this housing market crash therefore thanks to your preparedness you can be sure you do not lose any money. If you need more information and help with investment, check out our other articles in the category.