By: Kristen Riffle June 20, 2023

Courtesy of: www.insiderintelligence.com

The real estate market is a subject of interest and speculation, with concerns often arising about a potential crash or downturn. However, when we analyze various factors, including population trends, low housing inventory, and market dynamics, it becomes clear that the real estate market is poised for stability and continued growth.  In this article, we will delve into these factors and provide insights into why a real estate crash is unlikely in the current landscape. The housing market has been on fire in recent years, with home prices rising sharply. However, some experts believe that the market is due for a crash. They point to the rising interest rates and the recessionary fears that are currently gripping the market.

However, there are a number of reasons why the housing market is unlikely to crash. First, there is simply not enough housing for the number of people who want to buy a home. The National Association of Realtors (NAR) estimates that there are only 2.6 months' worth of housing inventory in the United States. This means that if no new homes were built, it would take just over two months to sell all of the homes that are currently on the market.

Second, the demand for housing is still strong. The NAR reports that there were 5.4 million homes sold in 2022, which is the highest number of homes sold in a single year since 2006. This demand is being driven by a number of factors, including the millennial generation entering their prime homebuying years and the rising number of households.

Third, the lending standards are much stricter than they were before the 2008 financial crisis. This means that fewer people are taking out risky mortgages, which will help to prevent a housing bubble from forming.

Of course, there are some risks to the housing market. The rising interest rates could make it more difficult for some buyers to afford a home. And the recessionary fears could lead to a decline in demand. However, these risks are unlikely to be enough to cause a crash in the housing market.

In the long term, the housing market is likely to remain strong. The population is growing, and the demand for housing is still outpacing the supply. This means that home prices are likely to continue to rise, albeit at a slower pace than in recent years.

1. Population Trends and Housing Demand: Population trends play a crucial role in shaping the housing market. According to data from Trading Economics, the United States has experienced steady population growth over the years. This growth, combined with the emergence of millennial and Gen Z populations as significant homebuying cohorts, continues to fuel housing demand. As these generations enter their prime home-buying years, the market will witness sustained demand, contributing to market stability.  The population is growing, and the demand for housing is still outpacing the supply. This means that home prices are likely to continue to rise, albeit at a slower pace than in recent years. Gen Z and Millennials who are your buyers right a now with little supply. 

Courtesy of: www.mortgagenewsdaily.com 

2.  Low Housing Inventory: One of the key factors supporting the stability of the real estate market is the low housing inventory. The supply of available homes for sale is limited in many regions, creating a competitive environment for buyers. This scarcity drives property prices upward, making it unlikely for a major market crash to occur. Low housing inventory ensures a balanced market where sellers maintain an advantage, providing a foundation for stability.  I reiterate, The National Association of Realtors (NAR) estimates that there are only 2.6 months' worth of housing inventory in the United States. This means that if no new homes were built, it would take just over two months to sell all of the homes that are currently on the market.  Reasonably you need a six month supply to accommodate demand. 

3.  Market Dynamics and Economic Factors: The real estate market is influenced by various market dynamics and economic factors. Favorable mortgage rates, for instance, have played a significant role in driving the market's strength. With historically low mortgage rates up until recently, homeownership becomes more affordable, attracting potential buyers and sustaining demand. Additionally, economic indicators such as job growth, wage increases, and consumer confidence contribute to a stable real estate market, which has been the drawback that we have seen in the last 24 months, mainly concerning inflation. 

According to Redfin: Here’s the full breakdown of where today’s homeowners fall on the mortgage-rate spectrum:

• Below 6%: 91.8% of U.S. mortgaged homeowners have a rate below 6%, down from a record high of 92.9% in the second quarter of 2022, as noted above.  

• Below 5%: 82.4% have a rate below 5%. That’s down from a peak of 85.7% in the first quarter of 2022. 

• Below 4%: 62% have a rate below 4%, also down from a record high (65.3%) hit in the first quarter of 2022. 

• Below 3%: 23.5% an interest rate below 3%, near the highest share on record. The highest was 24.6% in the first quarter of 2022.

4.  Regional Variations and Market Resilience: While it is important to analyze the national real estate market, it is equally crucial to consider regional variations. Real estate markets are local in nature, and factors impacting one region may differ from another. Understanding regional dynamics and market resilience helps to gain a more accurate perspective on the overall stability of the real estate market.

The housing market has been on fire in recent years, with home prices rising sharply. However, some experts believe that the market is due for a crash. They point to the rising interest rates and the recessionary fears that are currently gripping the market. First, there is simply not enough housing for the number of people who want to buy a home. Taking into account population trends, low housing inventory, market dynamics, and regional variations, it becomes evident that a real estate crash is unlikely in the current landscape. The combination of a growing population, limited housing inventory, favorable economic conditions, and localized market resilience paints a picture of stability and opportunity within the real estate market. As investors and homeowners, it is important to recognize these factors and make informed decisions based on a comprehensive understanding of the market.

Source: Trading Economics - United States Total Housing Inventory: https://tradingeconomics.com/united-states/total-housing-inventory