By Rogers Healy
Early in 2020, as the pandemic began to impact the economy, there was no way we could have predicted the booming market that has been in full swing essentially all year. It seems that there is no end in sight for this unprecedented year-long spring market to slow down, or cool off.
How long can this hot market realistically last as home prices continue to soar and inventory dwindles? The bidding wars have been fierce as buyers overreach to get in on the action while the market sizzles. Now, some buyers and sellers fear that the market has reached its pinnacle and is likely to decline as it reaches the point of overheating.
So, the question people are asking: Is the housing market about to crash?
I believe it is unlikely that the real estate market will collapse or even decline this year — or next year in 2022.
What is more likely to happen is that the increase in home prices will continue to rise, but at a slower rate than what we have been observing. The unprecedented price increases will slow in the coming months, which will actually help stabilize the market.
Historically, market crashes occur after a steep increase is observed in home prices caused by the intense demand for housing. Mass production of inventory is usually a byproduct of the demand for supply. Inevitably, demand slows while supply is still being mass produced which causes the value of properties to decline.
Based on those historical indicators, we are nowhere near seeing the market collapse again. Housing inventory remains at a record low. Additionally, record low mortgage rates have contributed to consumer demand for an increasingly low supply. The competition is so fierce that buyers are entering intense bidding wars and submitting offers significantly above listing prices. The pandemic has not deterred buyers and the increase in demand is likely to continue.
The trend that we have been observing —the rise in home prices — is likely to continue to rise the rest of the year and into 2022 as demand increases and inventory dwindles. Prices have increased drastically at an incredibly rapid rate. These sharp increases will have to slow at some point. While housing prices continue to rise steeply, they will likely begin to rise at a slower pace.
Additionally, employment rates continue to rise as the economy begins to recover from the strain of the pandemic, which further positions the housing market in a great spot. Mortgage delinquencies and foreclosures have declined month after month, according to reports from CoreLogic.
With increased demand and limited inventory, in addition to buyers willing to make offers well over listing prices, this year is one of economic recovery. Simply put —The market is likely to continue to boom in 2022 with a potential crash not realistic in this red hot market.
