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    Q: Are We Headed for a Housing Crash?

    Here’s why a housing crash isn’t likely in the next six months. 

    One of the interesting things about real estate is that it only goes up in value over time because it is a limited resource. In the week before filming this video, our number of showings actually surpassed that of pre-COVID-19 levels. We’re currently seeing 4% more showings now than we did in early 2020 before the pandemic. 

    4% might not sound like a ton, but the number of showings today is actually 17% higher than it was at this time last year. Our market is strong; we’re continually adding more pending contracts than we are new listings. 

    There are some doomsayers out there who point to the fact that four million Americans have filed for forbearance. Now, that is definitely a lot of people, but it’s still just 3% of the more than 126 million homeowners in the U.S. Some speculate that this number will rise in six months and lead to a collapse in the housing market, but sources matter; if you hear someone saying something like that, you need to ask who’s saying it, where it’s coming from, and why—it’s all just speculation at this point. The facts at hand aren’t alarming. 

    More buyers are looking for homes due to low interest rates. Quarantine forced us to spend extra time in our homes, and many otherwise complacent homeowners became potential buyers once they realized their home didn’t provide enough space. Others lamented the lack of office space, and are now keeping that in mind when they scan the market for a new home. 

     In three of the last five recessions, real estate actually went up 4% to 6% in value.

    The one thing that could hurt our market eventually is the unemployment rate, but regardless, we’re primed for a U-shaped, L-shaped, or V-shaped recovery. Based on recent market activity, it seems that a V-shaped recovery is likely. A U-shaped recovery is simply a slower recovery. Some predict a W-shaped recovery, which may happen if we have to enter lockdown once again in the fall. 

    While it’s impossible to predict exactly what will happen in the next six months, it’s important to note that in three of the last five recessions, real estate actually went up 4% to 6% in value. The two notable exceptions, of course, are the 1991 recession, when values dipped 1.9%, and 2008, when values dipped 15% to 20% depending on where you looked. The reason why real estate bounced back the least after the Great Recession is that real estate was the market that triggered it all. That’s absolutely not the case right now.  

    Also, from a mortgage standpoint, lending practices are much more conservative today than they were in 2008. Borrowers are no longer being approved left and right without much scrutiny. Besides, 37% of U.S. homes have no mortgage against them, while 26% have 50% equity in them. Honestly, it would take a whole heck of a lot to see widespread drops in property values. 

    If you’re one of my clients, I don’t want you to have fear. The sky is not falling like some folks would have it seem, and if it were falling, I’d tell you frankly. Reach out to us if you have questions or concerns on this or any other real estate topic; we’re always here for you.

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