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Is a Housing Market Crash Looming? Here’s What Experts Say

It’s no secret that the housing market is boiling hot. According to new data from the National Association of Realtors (NAR), home prices reached an all time high in April at $391,200, up 14% year over year.  

And within the last two years, that number rises to 34%.

The main reason for the rising prices is the lack of housing available despite the high demand. 

One question on everyone’s mind: Is another housing market crash on the horizon? Here’s what experts are saying.  

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Blackstone weighs in

According to Blackstone chief investment officer, Joe Zidle, the answer is: a crash is unlikely.  

Unlike 2007, home owners are not using their primary homes as cash-flow machines. Additionally, equity is at an all-time high, and balance sheets are looking strong. 

Another key difference is that there’s a shortage in housing at the moment, rather than an influx. “Because you have very little excess in housing, I think you end up having less risk,” said Zidle.   

But still, the Fed will still continue hiking interest rates until inflation is under control. 

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How are interest rates impacting the market ?

Earlier this month, the Fed raised interest rates half a percentage point. And it’s not stopping there. 

According to Federal Reserve Chair Jerome Powell, interest rates will continue rising until inflation is under control. 

“We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down.” 

Powell also warned that it may come at the expense of a slightly higher unemployment rate. 

While economists hope rising rates will help bring down high housing prices, the outcome is still to be determined. 

Biden’s plan to tackle the shortage 

So far, hiking mortgage rates hasn’t done a whole lot to cool down the housing market. We’re still seeing a historically competitive market with lack of inventory and record-high selling prices.   

However, what would-be first time home buyers, in addition to lower income buyers, are being beat out of the market by more experienced buyers and higher-income buyers who can afford larger down payments and higher interest rates.

In response, President Biden announced earlier this week the “Housing Supply Action Plan.” The plan would “help close America’s housing supply shortfall in 5 years, starting with creation and preservation of hundreds of thousands of affordable housing units in the next three years.”  

Source: Unsplash

What’s next? 

What we do know is that currently, the housing market is still extremely hot, despite rising interest rates and high prices. Another thing we know for certain is that interest rates will keep rising – for the foreseeable future. 

But in terms of the future state of the market, the reality of the situation is that nobody knows for certain what the future holds. But in the meantime, steps are being taken to get inflation under control, and hopefully tackle the housing shortage along with it. 

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