Two reasons why the housing market won’t crash

You may have heard chatter recently about the economy and talk about a possible recession. That kind of noise gets some worried about a housing market crash. Here’s good news, the housing market is not set up for a crash.

Real estate journalist Michele Lerner says: “A housing market crash happens when home values plummet due to a lack of demand for homes or an oversupply.” With that definition in mind, here are two reasons why this just isn’t on the horizon.

1. Demand for Homes Is Higher than Supply: One of the biggest reasons the housing market crashed back in 2008 was an oversupply of homes. Today, it’s a very different story.

Currently, there are more people who want to buy homes than there are homes available to buy. So, demand is greater than supply. When that happens, home prices stay steady or rise – the opposite of a housing market crash.

It’s important to note that inventory levels differ from market to market. However, most markets continue to experience a shortage of homes.

Lawrence Yun, Chief Economist at the National Association of Realtors, says:

“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”

2. Unemployment Is Still Low: When people are unemployed, they’re more likely to have trouble making mortgage payments and may be forced to sell or face foreclosure. That was a big problem during the 2008 financial crisis. Today, the unemployment situation is much more stable at just 4.1%.

People are working and making their mortgage payments. That’s one reason why the wave of foreclosures that happened in 2008 isn’t going to happen this time. Plus, since so many people are employed right now, many are in a better position to buy, and this demand keeps upward pressure on prices.

While it’s understandable to be concerned when you hear talk of a recession and economic uncertainty, but the housing market is in a much better place than it was in 2008.

Demand still outpaces supply, and unemployment remains low. And these are two key factors that will help prevent the housing market from crashing any time soon.

Bottom Line: It’s always good to stay informed about your specific market. If you have any questions or want to discuss how these factors are playing out, feel free to reach out.

Questions about buying or selling a home in Beaverton? Contact Donna Meeuwsen at 503.583.3200 or email donna.meeuwsen@exprealty.com.