Is a Housing Market Downturn Looming? Experts Weigh In

While mortgage rates continue their upward climb, home prices show no signs of slowing down, leaving prospective buyers wondering – is the housing market headed for a crash? Let's examine what industry experts have to say about the current outlook.

Soaring Home Values: The Persistent Trend

April data from the National Association of Realtors (NAR) revealed a 5.7% year-over-year increase in median existing home prices, marking the tenth consecutive month of such gains. The S&P CoreLogic Case-Shiller index further highlighted new record highs, with home values surging 6.5% compared to the previous year.

Although a brief cooldown occurred toward the end of 2022, home prices have since rebounded unexpectedly. According to Lawrence Yun, NAR's Chief Economist, nationwide price declines are improbable due to sustained demand and a record-high median sale price of $407,600 in April.

The Supply-Demand Imbalance

The root cause of these unwavering real estate prices lies in a simple supply-demand mismatch. Despite mortgage rates peaking at 8%, the limited housing inventory has kept property values elevated.

Greg McBride, CFA, Bankrate's Chief Financial Analyst, and Rick Arvielo, CEO of New American Funding, both agree that this scarcity is the primary factor propping up prices.

Affordability Challenges and Market Projections

While the current climate poses difficulties for first-time buyers, with monthly payments approximately $158 higher than last May, as noted by Skylar Olsen, Chief Economist at Zillow, a severe housing market downturn is unlikely.

Most analysts anticipate any correction to be mild compared to the dramatic downturns of the past, such as the Great Recession.

Why a Crash Is Improbable

The overwhelming consensus among experts is that a housing market crash is not imminent. Mark Fleming, chief economist at First American Financial Corporation, attributes this to the basic economic principle of high demand and low supply of available homes.

Foundations for Stability

Although the market may experience localized price adjustments, several factors contribute to its overall stability:
 

1. Homeowners with robust credit profiles and substantial home equity
2. Prevalence of fixed-rate mortgages
3. Cautious construction rates post-Great Recession, leading to sparse inventory

These elements position the market on firmer ground compared to previous years, as noted by housing economist Ken H. Johnson.

A Promising Outlook

With robust demand and responsible supply growth, the housing market is predicted to remain buoyant. Moreover, if mortgage rates ease in the future, a new wave of homebuyers could invigorate the market further, potentially leading to a healthier and more prosperous housing landscape for all.

Housing Assistance Programs

Nonetheless, various programs are available if you require housing support and assistance. One of the most well-known is the Section 8 Housing Choice Voucher program, which provides rental assistance to low-income individuals and families.

Additionally, housing counseling agencies and nonprofit organizations can offer guidance and support in finding affordable housing options. It's crucial to explore all available resources in your area, as there may be programs tailored to your specific needs.

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Looking for housing support and assistance? Check out these articles:

• Finding Landlords Who Accept Housing Vouchers
• Zero-Down Payment Mortgages Make a Comeback as Housing Costs Soar
• Advocating For Affordable Housing: How To Make Impactful Change