The most important part of working from home is having a home to work from!
So, it doesn’t come as a surprise that buying a house is in vogue in 2022 – some are even describing it as the new “gold rush” mentality. As a result, buyers, sellers, and realtors alike are searching for more information on these recent developments out of curiosity, and to find new investment strategies.
Nevertheless, the housing market is sizzling hot at the moment, and there seems to be no end in sight to the surge in real estate prices. While some believe that housing costs will simmer down soon, others fear that the housing market crash of 2008 will replay itself this year.
Also known as the “housing bubble burst”, the housing market crash occurs when speculators drive up the already high demand for housing. This is followed by an increase in supply, whereas demand slowly recedes. In the end, supply exceeds the demand, and so the “housing bubble” bursts.
Housing Market Crash a Trending Search on Google?
Why is “Next Housing Market Crash” a Trending Search on Google?
The question of the hour is accompanied by many others that don’t have a one definite answer. After all, it is the year of unexplainable surprises. So, let’s go back to where it all started…
Why Is The Housing Market So Competitive At The Moment?
Even with a tanking economy, a stock market that is showing negative signs, and a high unemployment rate, why are real estate prices still soaring high?
Remote Work Culture
The new trend of working from anywhere is probably the decisive factor for homes selling like hotcakes. With buyers no longer coming up with a list of demands about being close to workplaces and public transport, realtors cannot complain when it comes to selling houses.
In fact, it is commonplace to see potential buyers voluntarily lining up outside condos, complaining about the competition in the market. On the other hand, real estate agents are finding it more difficult to find enough listings to cope with the rising demand.
Perhaps, remote work may also be credited for bringing about a whole new type of buyer to the suburbs – namely, former city dwellers. After all, once city folk realized that high-paying jobs can be done remotely, it’s expected that they show a keener interest in working from secluded residential areas away from Covid hotspots.
Dearth Of Houses On Sale
Of course, demand for houses exceeding the supply resulted in a steep rise in housing prices. However, it is interesting to note that the pandemic only worsened the existing dearth of houses that was plaguing the market in the previous years.
In fact, the decade before 2020 went down in history as the period when the least number of new houses were built. Additionally, sellers, in recent days, have taken their names off listings for the fear of infection from strangers who walk into their homes for open houses.
Government Aid
With the moratorium on foreclosure in place, potential home-buyers are taking the plunge and looking to take a risk even with a looming future of uncertainty. In simple words, this means that the government has put a temporary ban on banks for foreclosing on someone just because they cannot keep up with loans.
Moreover, the Federal Reserve has passed regulations that keep borrowing costs low. In fact, the plummeting mortgage rates have enticed even those who were on the fence to seize the opportunity. After all, buying a $300,000 house in 2022 can save you about $60,000 more than if you bought the same house a year before!
Needless to say, these, in addition to the Covid stimulus checks, come as a result of the recession caused by multiple lockdowns across the country.
Millenial Home-Buyers
As all this is going on, millennials – the biggest generation of Americans ever, according to a 2020 survey from NAR – are now at an age where they are financially equipped to buy homes. Moreover, studies reveal that buying a home today is proving to be more cost-efficient than renting. Perhaps this is what is driving throngs of millennials to the housing market when supply is at an all-time low.
And now, coming to the question of the hour…
Will The Housing Market Crash?
Despite the panic and proclamations that the housing bubble has already burst, there are reasons to believe that the boom will remain for some time. It will cool down in due time, but a crash is unlikely. Here are a few reasons why.
Death Of Cities Exaggerated
There is no denying that the sale of houses in suburbs dramatically increased because millennials are looking for larger spaces. This is in addition to the fact that they can finally get some respite from the city without losing their jobs.
However, far from being dead, urban businesses are being reopened and there are still many who depend on the amenities and opportunities of the cities for their livelihood or convenience. In fact, things are looking up for the cities with more than 100 million Americans now fully vaccinated, and economies on the path of being revived.
Low Supply
Perhaps the most crucial requirement for a full-blown “housing bubble burst” would be a surge in supply that outpaces the already sky-high demands. This would require many old homeowners to list their properties – which, as mentioned earlier, has taken a backseat.
Moreover, it is highly unlikely that new houses can be built at a pace fast enough to keep with the demand – let alone exceed it. Especially considering the rising cost of land, labor, and building materials during trying times such as these.
Typical Season Patterns
Rather than being based on mere speculation, the housing market boom is considered a result of a post-Covid changed lifestyle that is rooted in logic. Hence, it is predicted to follow typical patterns of price drops after a flourishing sale season.
Moreover, mortgage rates are slowly but definitely increasing. Soon, many are expected to hit their affordability wall and withdraw from the market, leaving only a few buyers to even out the demand.
Mortgage Underwriting
What separates the housing market boom of 2022 from the disastrous one of 2008 is the fact that the surge in prices is now controlled by actual demand and stricter underwriting.
In other words, there are fewer risky buyers, and most can almost definitely afford their homes. In fact, many buyers are already homeowners and landlords, who aren’t buying homes to live in, but are simply looking for investment properties and refinancing.
Final Words
With all that being said, there is surely an unprecedented rise in prices – that is still on the rise.
Although it may seem worrisome at first glance, there is reason to believe history won’t repeat itself this time. Especially with the memories of the 2008 housing market crash still fresh in people’s minds.
But, as mentioned earlier, the US has not been able to keep up with buyer demand over the past decade. Couple this with the fact that homeowners are increasingly taking their names off listings.
All in all, it just goes to show that it will be many years until enough supply can be accumulated to cause the “housing bubble” to burst. And to those who were looking to be proved right…
Sorry to burst your bubble, but the housing market is most likely on its way to correction!
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